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GroupM downgrades India's ad expenditure growth to 6.6% in 2012

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MUMBAI: A weakening Indian economy has prompted GroupM to cut by almost half its India ad growth forecast for 2012, from 12 per cent to 6.6 per cent.

In its mid-year forecast, GroupM has downgraded advertising expenditure in 2012 to Rs 355.92 billion, from its January estimate of Rs 373.97 billion. The WPP agency had pegged the ad spend size in India in 2011 at Rs 333.88 billion, up 13 per cent from the earlier year.

What has darkened the ad horizon is a feeble growth in the first half of the year with inflation staying stubborn, rupee depreciating and government not moving forward on policies. Though elections are source of additional advertising, political spending limits per candidate have been applied more strictly. "This resulted in the spends being lower than expected," the new forecast said.

GroupM, however, expects ad demand to improve in the second half. "This is most likely to happen with larger categories like Telecom which reduced expenditure considerably in the first half of the year: most of the pullback has been among large national advertisers rather than regional players. Perhaps as a result, there is a reduction seen in the more premium media properties such as sponsorships," the report said.

Television

Though television is the most affected medium by first-half pullbacks, it will still constitute the highest share with 41.6 per cent amongst other mediums.

The growth of the medium is expected to be 5.6 per cent to gross Rs 148.12 billion.

“2011 had the cricket World Cup which attracted an incremental Rs 8.5 billion. This was obviously expected to drop out in 2012, but April-May IPL cricket did not perform as strongly as previously to compensate. In addition, the Telecom category cut down spends substantially in the first half of the year. Financial services have been adversely affected by poorer economic conditions here as elsewhere in the world. Even consumer durables spent less in the first half of 2012 than the prior year period. Occupancy of premium inventory has decreased with advertisers choosing to stay with safer tried-and-tested formats,” the report says.

GroupM, however, expects a bounce back in 2013 and predicts ad spend growth to climb 14 per cent that year.

Print

Print (dailies) growth is expected to be a little less than formerly expected. The regional publications have expanded into new markets and have actively developed local advertisers, largely in the retail categories. They have, therefore, added some ad volume, even though the larger national advertiser categories have scaled back investments.

GroupM predicts the medium to have 39.2 per cent share with five per cent growth in 2012. Print, as a medium, is expected to grow to Rs 139.68 billion from Rs 133.03 billion in 2011.

Radio

The radio segment has been impacted by the slowdown in the first half. Phase III FM auction has been pushed to 2013, so delaying this uplift to next year. Individual markets have seen very varied demand according to local retail conditions. The medium will have 4.5 per cent share and is likely to see 9 per cent growth, higher than TV, newspaper and outdoor.

Ad growth in the radio industry is expected to be 9 per cent, touching Rs 15.89 billion. The medium is expected to grow at 10 per cent in 2013.

Outdoor

The agency has also revised its 2012 outdoor growth forecast from nine to six per cent. Reduced consumer demands and the current global turmoil have caused 2012 budget reductions in categories including telecom, automotive, banking, financial services and insurance (BFSI), real estate, and FMCG vis-a-vis 2011. The trend began in 2011 and continued into the first quarter of 2012, which is considered to be seasonally very important for BFSI.

In the first half of 2012, there has, however, been increased investment from the entertainment and media category in OOH medium. The reduction is affecting the metro markets but not the non–metros and smaller towns, where demand from local advertisers in a few categories like jewelry, apparel, Education, real estate and construction has offset the withdrawal of national activity. Smaller towns are actually seeing ad demand rise as much as 25 per cent.

OOH ad industry is estimated to be around Rs 17.98 billion in 2012, which will grow to Rs 19.06 billion by next year.

Digital medium ad growth remains unchanged since the last forecast. Given that it typically has smaller outlays and is very response-based, it has not been affected like other media. Digital medium with share of 5.5 per cent is expected to grow at 30 per cent, more than any other medium.

Retail Media and Cinema

Retail Media and Cinema are also performing as expected. Even though telecom advertising fell in the first half, categories like FMCG and durables have risen in these media. As previously envisaged, destinations in smaller markets have experienced raised demand of about 10 per cent. Leisure destinations have also expanded their presence in these smaller markets that has helped drive spends, the report said.

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