Group M report ranks India as 3rd largest contributor in advertising

Cinema & outdoor to continue to grow in the country as technology adoption improves ad visibility

GroupM, WPP’s media investment group, released its 2018 and 2019 ad investment forecasts which indicate slightly downgraded 2018 growth expectations, from 4.5% to 4.3%. The growth predictions for 2019 growth are also whittled from 3.9% to 3.6%, with total new investment anticipated to reach $19 bn, instead of the $23 bn earlier predicted. [Recent US dollar appreciation versus just about every other currency helped suppress this growth.] Stress on the auto category stood out in feedback from GroupM’s worldwide network, as did the absence of any rebound in CPG investment with traditional media. These views and more are discussed in This Year, Next Year, GroupM’s twice yearly look at worldwide media investment trends authored by Futures Director, Adam Smith.

“GroupM’s still strong but slightly fraying 2018 view ties to macro questions: tighter money, China’s slowing growth, and the potential for pricey trade wars,” said Smith. “Real interest rates are edging up globally, but serious potential problems remain limited to a fragile five -- Argentina, South Africa, Brazil, Turkey and Venezuela.”

GroupM forecasts that ten countries will provide 83% of all 2019 growth.

China remains the largest contributor, but 2019 will be its sixth successive year with single-digit ad growth and mark its lowest growth rate yet recorded. Still, its USD 90 billion ad market is second only to the USA, and has doubled since 2010. Despite rapid consumerization, China’s advertising intensity peaked at 0.78% of GDP in 2006 and has trended down to a prospective 0.67% in 2019.
Ranked second, the U.S. is experiencing good macroeconomic indicators like lower unemployment and improved consumer confidence, but increasing energy prices, rising interest rates, and low unemployment are seen as potential for increased inflation on top of a yawning deficit. Marketers continue to scrutinize digital investment with emphasis on verification and value.
Ranked third, India is expected to contribute $1.35B of growth. This is roughly the same as Australia’s, Russia’s and Brazil’s combined growth, even though India’s total ad economy is a mere quarter of the others’ combined heft. India’s 14% ad investment growth is rooted in 7% real consumer spending growth.

Concerning the new forecast, GroupM’s CEO, Kelly Clark said, “Worldwide advertising investment grows slowly but marketing has never moved faster. Automation proliferates; cycles accelerate; talent grows more mobile. The gap between the cost of failure and the value of success grows wider. For advertisers, this underscores the importance of a world view and trusted partners who can help their brands perform where the growth can be found.”

Talking about the Indian market, the report says that the IMF expects real GDP to grow 7.4% in 2019 (12.1% nominal), driven mainly by services and private consumption; manufacturing and agriculture are likely to see moderate and low growth, respectively. Cinema & outdoor will continue to grow, as technology adoption improves ad visibility and from the growth of organized retail.

Highlights :

•  Auto advertising growth is expected to be high, as car, scooter, luxury bike and commercial vehicle segments will see good sales growth in 2019, driven by urban demand and infrastructure spending. Rural-led motorcycle sales will be monsoon-dependent.
• BFSI ad spends will be moderate to high, as bank ad spends remain subdued but insurance and financial services spend robustly to expand penetration, with the government-led health insurance scheme also providing a boost to growth.
• Consumer durables ad monies will see moderate-to-high growth: low penetration in consumer appliances, shorter replacement cycles in consumer electronics, robust replacement demand overall and unexpected/extreme weather – hotter summers, hazier winters – will all contribute to spends.
• E-commerce ad spends will grow fast: a report cites the sector to touch $100 billion GMV by 2020, while Morgan Stanley predicts it to touch $200 billion by 2026 and expects ~50% of India’s internet users to have matured by 2019/20 (five years or more of internet use). Online shoppers are expected to increase from the current 14% of internet users to 50% by 2026.
• Retail- Strong consumer expenditure growth should lift Retail advertising in the order of 12-14% year over year between 2017 and 2020, and the explosion of modern retail, expected to nearly double in size between 2016 and 2019, will drive ad monies
• FMCG ad spends will grow fast, as key drivers remain strong: expanding rural penetration, strong rural demand supported by increased welfare spending in a busy election year in 2019, and steady urban sales and growing interest in luxury and health-wellness products.
• Telecom ad growth will be driven by mobile handsets. 2017 saw 288 million shipments (124 million of which were smartphones). The IDC predicts mid-teen growth in 2019-2020, led by low-priced handsets. Telco spends will be conservative, as incumbents face continued pressure on margins due to intense competition – likely to continue till 2020