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Indian media ad rev to grow by 8.7% in 2012: MPA

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MUMBAI: Media ad sales will grow by 8.7 per cent in net terms this year against the background of a slowing economy with the real GDP falling from the historical range of 8-9 per cent to 7 per cent, says Media Partners Asia.

The absence of the Cricket World Cup that took place last year will also impact slow ad growth.

The ad revenue growth in 2012 will be primarily driven by MNCs investing in India. There could be upward revisions made in the second half of 2012.

The outlook for ad growth across key categories is mixed.

FMCG: Media buyers expect robust growth from the FMCG sector, which is the largest advertising category, contributing 30-35 per cent to total ad spend.

MNCs are expected to report robust numbers, while a few large MNC accounts (with annual ad budgets in the region of Rs 2-3 bn) are looking to increase spends by 50-70 per cent for the coming year.

Domestic FMCG companies are expected to see only marginal growth as the profits of these companies have deteriorated due to rising input costs.

Auto: Traditional companies such as Maruti and Hyundai have reduced spends, but global car manufacturers investing in India are driving the overall growth for the sector.

As suggested in the recently held Auto Expo 2012, the sector will benefit this year from new launches in the two-wheeler and utility vehicle segments in subsequent quarters.

Telecom: The year will see flat-to-declining spends among the telcos as their profits are falling.

Life insurance: MPA forecasts steady growth in the life insurance sector, a prevailing trend in this category since 2008.

A reversal of interest rates will be the underlying factor influencing consumption and ad spend across sectors. The rising interest rate cycle seems to have peaked out. After raising interest rates by 13 times since March 2010, the Reserve Bank of India (RBI) may shift its approach towards the country‘s monetary policy.

Inflation is likely to fall considering the high base last year, and in order to bring the country‘s economic growth back on track, the RBI is likely to reduce interest rates gradually in 2012. This will encourage investments and spending, in turn benefiting the ad market, especially in the second half of 2012.

Consumption demand has held up reasonably well though rural demand may be a concern going forward, highlighted by a recent slowdown in sales of two wheelers and durables.

Other key factors that will have an impact on the ad marker include:

Competition in Hindi GEC: Competitive intensity in the Hindi general entertainment channel space is nothing new, though new competition is accelerating amongst second-tier channels. There has been a change in the pecking order of top three Hindi GECs, with Sony climbing up to the No. 2 spot while incumbent Zee TV has now slipped to No. 4.

"Based on our discussions with some of the major media buyers, the genre currently has limited supply of inventory, which should keep ad rates healthy," MPA said.

Digitalisation to create new niches: Before the first phase of digitalisation is implemented in June 2012 (it may be delayed to December 2012), broadcasters are already rolling out new niche channels in various genres like action and comedy. This will attract advertisers who are willing to target and segment their audience not just from demographic but also psychographic parameters.

FDI in single-brand retail: Opening up of FDI in single-brand retail (precursor to opening up multi-brand retail) will benefit regional print companies.

State elections: In the near to medium term, print media will benefit from the upcoming closely contested elections to be held in five states: Uttar Pradesh, Uttarakhand, Punjab, Goa and Manipur.

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