Advertising industry lives on hope

Last Updated: Mon, Dec 31, 2012 05:49 hrs

Even the glitzy world of advertising couldn’t escape the dominant theme of 2012: the overhanging slowdown. In 2011, the advertising industry grew by 9 to 10 per cent in comparison to the double digit growth rate of 20 per cent in 2010. According to ad industry estimates, the growth this year has been similar to 2011.

The Rs 30,000-crore advertising industry has been dealing with tightened purse strings as companies across sectors dealt with issues ranging from rising input costs to demand slowdown on account of lower disposable income and inflation. The big boys of the advertising club — fast moving consumer goods (FMCG) companies — were careful with their money, especially in the first half of the year, complicating matters further. Sample this: Ad spends by FMCG companies have been hovering between 12-13 per cent of sales from 14 -15 per cent earlier.

The bigger concern was a general slowdown in other sectors such as retail, real estate, auto, financial services and telecom. These categories are also heavy spenders in print and outdoor advertising and proved to be a drag on these mediums. (The year when good became the enemy of great)

While television rode the storm out growing at around 10-12 per cent, English publications and news channels were hit, according to M G Parmeswaran, ED and CEO, Draftfcb + Ulka. Reason: the financial services, major advertisers in English publications and news channels, cut off their advertising budgets almost entirely during the year.

But there is good news in store for the industry in the new year. Ashish Bhasin, chairman, India, and CEO, South East Asia, Aegis Media says, “Growth should kick back in next year, around the second quarter of the calendar year.” His view is backed by a report by Motilal Oswal on the Indian print media that states that the near-zero print advertising growth rate in the first half of the 2013 fiscal year, has believably bottomed out. And a recovery is imminent, riding on factors like possible softening of interest rates which will also aid the print-heavy categories of real estate, financial services and auto, adds the report.

The medium that bucked the trend this year was digital, clocking a staggering growth rate of almost. 45 per cent. But, since this growth rate is calculated on a relatively small pie, the numbers can be misleading, say experts. And in part could also be the reason why advertising professionals still hold the view that digital is much hype, less performance even now. “Digital could have been far more impactful. But few really used it. Most just stick to lip service and threaten to use, not exploiting the medium sufficiently,” says K V Sridhar, NCD, Leo Burnett.

Parmeswaran agrees. He says that digital started offering interesting options this year but is not being used much across the board. The discovery on this front for the year was online video sharing platform, YouTube, starting its True View options, where companies pay per ad viewed.

The worry on the digital front is that it is mostly being used by online merchants like Snapdeal, Flipkart, Jabong etc. And should they stop “burning their cash for the medium”, digital may suffer a setback in the new year.

Slowdown in ad spend seems to have had a rub off effect on the creative output of the year, as few campaigns stood out. The usual suspects like Coca Cola, Pepsi, Vodafone disappointed. Others like Airtel, Cadbury, Flipkart, Fevicol, Kaun Banega Crorepati (KBC) continued the show with tried and tested campaign themes. A few like Tata DoCoMo with its unfinished stories and Hero Motocorp with its range film, pursuant to the split with Honda, attempted to break new ground.

Sridhar concedes, “Creative output could have been much better this year, especially after some really good campaigns (in 2011). Even at Cannes (advertising awards), our performance disappointed. Most brands just continued what they have been doing. There were no major pathbreaking works.” The new year will prove better only if brands are willing to experiment with new themes and abandon the safety of what has worked.

On the business side though, the year was quite high octane with the mergers and acquisitions space abuzz. Whether it was Omnicom picking up a stake in Mudra or IPG consolidating its presence or Dentsu lapping up a majority stake in the creative hotshop Taproot, the year was hardly lacking in action. “Last year ended with many saying that independent agencies like Taproot will steal a chunk of work from the bigger players. But, after Dentsu picked up a stake in the company, the discussion surrounding the feasibility of independent agencies has restarted,” says a senior advertising professional.

The discussion is further fuelled by conversation about companies seeking integrated solutions, or as Bhasin puts it, “benefits of specialisation without siloisation.” That, he feels, will set the tone for 2013 where the hopes of a rebound may be abound, but the reality of tough times lying ahead cannot be denied.

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