Indian ad market on a swift recovery course

MUMBAI: The Indian ad market is on a swift recovery course and is set to grow at 9 per cent this year, leaving behind its slow crawl in 2009, as television and print see a strong rebound.

Upgrading its forecast for India, ZenithOptimedia said Wednesday television would accelerate to 11-12 per cent growth this year, compared to a 6 per cent growth in the earlier year.

Print will see a 7-8 per cent annual growth through to 2012, pacing up from a 5 per cent growth in 2009.

"Having consistently outperformed the economy as a whole for years, the ad market slowed to just 1 per cent growth in 2009. Recovery has been swift, however, and we forecast 9 per cent growth in 2010," the study said.

Fuelling the ad growth in the television segment will be the spread of digital TV and new advertising opportunities such as sponsorship of new ‘larger than life‘ entertainment formats.

Sports will also drive growth in television advertising, partly due to the success of the Indian Premier League (IPL). "This trend is likely to continue as India hosts the Commonwealth Games this year," the study said.

Television broadcasters, however, feel the sector is poised to grow faster than ZenithOptimedia‘s forecast.

"The television segment should post an ad growth of over 15 per cent. This will be a watershed year as television will overtake print in absolute terms. The economy is on a sound growth path and intense competition among the FMCG companies is leading to a correction of ad rates. Other categories are opening up and we see a strong rebound in the financial sector. IPOs (initial public offering) have been lined up. Hindi general entertainment channels have become much stronger and are not being affected by big-ticket items," said Zee Entertainment Enterprises Ltd chief revenue officer and head niche channels Joy Chakraborthy. 
Star India is also bullish on the ad growth in 2010. Said Star India president, ad sales Kevin Vaz, "The ad spend on television is expected to grow at a minimum of 15-20 per cent this year. And the growth will be witnessed across categories. While FMCG will show a sharp upward ad spend, the advent of new telecom players and handset manufacturers will boost the growth further. Financial investment advertising will also show a comeback."

ZenithOptimedia scripts a healthy picture for print as well. "India is one of the few large markets where newspaper advertising continues to grow. Rising literacy levels and improved distribution in the regions are steadily improving newspapers‘ reach. Magazines suffered a sharp fall in ad expenditure in 2009, though part of this fall may be ascribed to the fact that the indirect advertising and sponsorship option most consumer magazines now offer are not being picked up in the monitored ad expenditure figures," the study pointed out.
Internet advertising in India remains low in reach but high in opportunity. Growth is being driven by the spread of the mobile internet and the youth culture of social media. Large corporations now value the opportunities offered by the media, and are investing more time and money. Thus, Internet advertising is expected to grow at about 25 per cent annually for the coming three years.

Global ad expenditure forecast

Zenith Optimedia expects global ad expenditure to grow by 2.2 per cent in 2010, up from the 0.9 per cent growth that it had predicted in December.

This is the agency‘s second upgrade in a row, stating a 1.3 percentage point improvement this time as compared to a 0.4 point improvement in December.

It has also upgraded its forecasts for the next two years, though not so dramatically. The agency predicts 4.1 per cent growth in 2011, up from 3.9 per cent, and 5.3 per cent in 2012, up from 4.8 per cent. According to Zenith Optimedia, this pattern of recovery is normal as after the previous two recessions, it took three years of progressive recovery for the global ad market to return to normal growth.

After suffering a deep 12.1 per cent decline in 2009, the developed markets (which are defined as North America, Western Europe and Japan) are stabilising, with occasional signs of surprising strength.

The study states that the UK‘s television market, which has been shrinking since 2005, was up 7 per cent in Q1 2010, and will be up at least 16 per cent in Q2. In the US, network radio is up about 20 per cent for the first half of 2010, with strong support from retail (which has nearly doubled its spend year on year).

Since the beginning of 2010, Spain‘s TV market has managed to absorb a 20 per cent reduction in capacity, after advertising was removed from all public channels, with little to no reduction in expenditure. At the moment these represent isolated pockets of recovery, but they demonstrate that advertisers are becoming more willing to take advantage of good opportunities when they arise.

The report expects the recovery to become more general as the year progresses, leading to overall growth next year. It forecasts a 0.8 per cent decline in developed-market ad expenditure in 2010, followed by 1.8 per cent growth in 2011. North America, having led the world into recession, will be last out, with a 1.5 per cent drop in ad expenditure in 2010, while Japan drops 0.7 per cent and Western Europe grows 0.4 per cent. 
Markets in the developing world (everywhere apart from North America, Western Europe and Japan) followed two very different paths in 2009. Many markets in Central and Eastern Europe suffered a very sharp drop in ad expenditure at the beginning of the year, when investors and advertisers were afraid that the financial crisis and drop in global demand would permanently damage these markets‘ prospects. Ad expenditure fell much faster here than in the developed world: across the whole of 2009 ad expenditure fell 23.1 per cent in Central & Eastern Europe, with drops as extreme as 42 per cent in Russia, 44 per cent in Latvia and 48 per cent in Ukraine.

"The fears of early 2009 have now largely receded, and we expect these markets to make up their lost ground quickly over the next few years. We forecast 5.7 per cent ad spend growth in Central and Eastern Europe in 2010, and 8.5 per cent in 2011," the study said.

The rest of the developing world was more robust during the downturn. In 2009, ad expenditure grew 4.8 per cent in the Middle East, 0.4 per cent in Latin America and held steady in Asia Pacific (excluding Japan). Many markets in these regions continued to grow throughout the year, notably Lebanon (25.4 per cent), Indonesia (18.8 per cent), the Philippines (14.5 per cent), Argentina (12.7 per cent) and China (7.4 per cent). These growth rates demonstrate the fundamental health of these markets, which the agency expects to maintain similar performances over the next few years.

Other markets in these regions were not as resilient in the downturn and will not grow so quickly during the upturn, but most should comfortably outpace the developed markets. "Overall we forecast the Middle East to grow 4.7 per cent in 2010, Latin America to grow 9.3 per cent and Asia Pacific (again excluding Japan) to grow 10 per cent," the study concluded.

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