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OOH in Covid Times

By M4G Bureau - August 10, 2020

Innovation and customer-centricity helped the OOH industry to come out stronger from the 2008 crisis; today, the industry is called upon to reinvent its business to overcome the unprecedented crisis caused by the Covid-19 pandemic

Sunder Hemrajani, CEO & Co-founder<Br>Incon Strategy AdvisorsThe world of advertising & media is going through an unprecedented crises. There have been difficult situations earlier but nothing like this ever before. The financial crises of 2008-09 was tough but it was different in many ways.

It is important to understand the nature of the two crises. In 2008-09 the crisis was manmade. The corporate and individual greed led to the formation of bubbles in various sectors and when the bubbles burst through a situation created by the subprime mortgages, the world went into a financial meltdown. That sent shockwaves across the world and all economies were adversely impacted. Some of them went into a recession and most of them experienced a slowdown. The crisis had economic and financial dimensions. That impacted the businesses all over the world.

In India, the impact was seen across sectors. The media and advertising industry took a direct blow. Advertising budgets were cut. There were widespread layoffs. Countries across the world including India gave fiscal stimulus to revive the industries and the economy. Those steps helped the economies to bounce back and industries which had cut fixed costs and stayed consumer-centric came out stronger and the following years saw demand picking up despite the stimulus being phased out.

The OOH industry worldwide and in India also recovered. That also resulted in the migration of revenue to quality assets. The transit segment, especially the airport media, experienced strong double digit growth. Needless to say, commoditised segments like roadside billboards and street furniture were adversely impacted (Table 1). Innovation and customer-centricity helped the industry to come out stronger.

Covid-19 Crisis

The current crisis goes beyond the medical dimension. We should see this crises as a whole event. There are various dimensions to it -- medical, financial, operations, economic and financial. It is quite different from the financial crisis of 2008-09. No one knows what to do. There are no pre-existing, off-the-shelf answers. This problem has not been seen before.

In an unprecedented situation like Covid 19, virtually nothing is known. This is a new normal for a temporary but indefinite period. There are no quick answers. It is an ever-changing situation.

Impact on Advertising Industry

In India, the advertising revenues have been experiencing a slowdown over the last couple of years in sync with the slowdown in the economy. Since 2017, the economy has been experiencing slowdown, largely due to the effect of demonetisation and poor implementation of GST. From a GDP growth rate of 7% in FY17, it is now down to 5% in FY20. It has been on a downward slope. Q4FY20 was down to 4%.

Last year, the advertising industry clocked approx. Rs 67,000cr which was a marginal growth over the previous year. Most segments like Print, Radio & OOH declined. Only TV and Digital showed some growth. Over the last five years the Digital segment has grown significantly, thereby putting pressure on other traditional segments like Print, Radio and OOH. Today, it contributes 18-20% in terms of revenue to the advertising pie.

The lockdown has been a brutal blow for the OOH industry. Clients slashed their advertising budgets. Some of them just stopped advertising. TV advertising was down 60-70% in April-May and Print, Radio & OOH was down 80-90%. In FY21, the industry is likely to decline over the previous year against an estimate of Rs 75 000cr, given the fact that the GDP is also expected to decline by 5%. Q1FY21 has been a washout. IPL has been postponed and the summer product campaigns are at a very low key.

OOH Outlook in the Crises

Where does that leave OOH? The industry had a tough FY20. The second half was a disaster. The industry will have to reinvent itself (Refer Table 1). There is likely to be a migration to quality assets like airports and Digital OOH assets. The revival would be led by FMCG, e-commerce, smartphones and new product categories like hygiene products, OTT, online education and high speed home networking solutions. While the traffic at the airports is likely to decline, on the positive side, the dwell time is likely to increase thereby giving the brands an opportunity to engage with customers.

Table 1: OOH - Segment-wise Contribution (Revenue)

Formats

2009

2015

2019

Traditional*

76%

62%

54%

Airport & Transit

22%

37%

39%

Others

2%                                                 

1%

7%

*Includes Bill Boards & Street Furniture                                  

Innovation in formats and content will enable the brands to drive for higher value from their spends. Categories like handsets, automobiles, financial services, e-commerce and lifestyle products are likely to see a quick revival. In addition to the airports, railways and malls are likely to bounce back. Traditional OOH like billboards are likely to suffer given there is an overcapacity which will accentuate its commoditization. OOH industry should focus on demand side instead of supply side. In fact, there may be a case for reduction in supply. All stakeholders -- asset owners, media owners, advertising agencies and the brand owners would need to work together to pull the industry out of the trough.

Conclusion

During my tenure at Times OOH, we learnt some good lessons during the financial crisis. We built a high performing team, culture and processes right in the midst of the crisis. We improved our productivity; acquired the rights to the new Delhi Airport in the immediate aftermath of the crisis and the new Mumbai airport in 2012.

That enabled the company to achieve strong double digit growth right from FY11, primarily driven by innovation, customer centricity, international expansion and driving long-term business.

During crises the companies have a choice to make. Every crisis throws up opportunities since most of the competition would be retreating. Most companies are playing ‘Not to lose’, characterised by defensive, passive, reactive and self-limiting behaviour. The fear of pain from losing is greater than the pleasure from winning.

’Playing to win’ entails relentlessly pursuing new opportunities with a single minded commitment to winning. That drives a behaviour that is offensive, assertive, proactive and solution oriented. The success of Times OOH is a testimony to the ‘Playing to win’ approach.

Sunder Hemrajani has over 35 years experience in Sales, Marketing and General Management functions in leading companies like Hindustan Unilever, Whirlpool, PepsiCo and Times.  He had a 14-year stint with Hindustan Unilever where he handled senior assignments in HPC (Home & Personal Care) and Foods businesses. He retired as Managing Director of Times OOH in 2014. He is the CEO & Co-founder of Incon Strategy Advisors. Sunder is an alumnus of Harvard Business School. He did his MBA from Faculty of Management Studies (FMS) in 1979 and Graduated in Mechanical Engineering from Delhi College of Engineering (DCE) in 1977.

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