The phenomenal growth of ad business in India and how NCR played a part in it

  • | Sunday | 11th November, 2018

Despite this growth, though, advertising spends as a percentage of GDP are still very small. By Navin KhemkaWhen the Times of India approached me to pen my first article, I thought it was most appropriate to write on the phenomenal growth of the advertising sector in India.Here’s why. This growth is driven by a massive proliferation of media alternatives, leading to fragmentation. Rural consumption of media, propelled by enhanced government focus, electrification, expanding TV/mobile phone penetration and rising literacy levels, is also fuelling this growth. Rightfully, media and advertising agencies have followed the trend, helped by availability of premium office space, talent and great connectivity (global and local).

By Navin KhemkaWhen the Times of India approached me to pen my first article, I thought it was most appropriate to write on the phenomenal growth of the advertising sector in India.Here’s why. While advertising spends globally have grown at a three-year compounded annual growth rate (CAGR) of 3.5%, in India they are growing at a CAGR of 11%, albeit from a smaller base (even China has grown at a CAGR of only 5.6% over the past three years). In 2017, we were the world’s 11th-largest advertising market, and are expected to become the 10th largest by the end of this year (when the industry is likely to be worth approximately Rs 70,000 crore).India is a unique market where all media, including print, have headroom to grow. This growth is driven by a massive proliferation of media alternatives, leading to fragmentation. And the consumer is spoilt for choice. Rural consumption of media, propelled by enhanced government focus, electrification, expanding TV/mobile phone penetration and rising literacy levels, is also fuelling this growth. Today, India has more cellphone connections than toilets. And the so-called media ‘dark areas’ are no longer dark. Not surprisingly, media and marketing companies are eager to grab their share of the unstructured rural market, which is getting organised very fast.But over the past few years, local advertising in the form of retail, real estate and education has slowed down, putting pressure on local media, while the cost of advertising in national mega properties like IPL and World Cup cricket, etc, has increased significantly. Despite this growth, though, advertising spends as a percentage of GDP are still very small. While developed economies are operating at >1% of GDP, India is still atIn India, advertising spends form the backbone of the media and entertainment industry but media houses continue to be dependent on advertising as a key driver of revenue, unlike in developed markets, where different streams like subscription and distribution (among others) also contribute significantly to overall revenue. Even TV channels that are ad-free globally rely on advertising revenues to survive here. Because the average Indian consumer is still used to paying a monthly subscription of less than Rs 150 to get access to a wide range of channels. The same is true for print, where the cover price does not even cover the distribution cost, forget the high costs of production, content, etc.However, as the urban consumer evolves, market dynamics change. With increased digitisation , a host of over-the-top (OTT) and other media apps have flooded the market and are now changing the game. Further, the more evolved urban consumer is willing to pay for superior ‘glocal’ content, which is ad-free, on-demand, portable and unique. No wonder we see more headphones than conversations on city metros, trains and flights today. Consequently, the average time spent in the digital space is rising significantly across media platforms.Also, having worked in this region for over two decades, I think it’s fair to give NCR its due in the growth story. Mumbai was always considered the Mecca of Indian advertising but over the last two decades (actually, from 1995 onwards), growth has gradually shifted out of Mumbai. Gradual, yes, but so steady that now, as per estimates, NCR has overtaken Mumbai through the sheer amount of advertising rupees that get spent from this region. The shift is significant. While Mumbai is still the hub for creative talent, production houses, film production, etc, the majority of new-age advertisers have checked into NCR.Leave aside the traditional big advertisers in Mumbai, most of the high-spending categories — auto, colas, telcos, handsets, dotcoms, durables, etc —have either set up offices in or shifted their base to this region. Rightfully, media and advertising agencies have followed the trend, helped by availability of premium office space, talent and great connectivity (global and local). Even digital agencies, growing rapidly in this market, have set up base here.Yet, it is not certain if this trend will continue. Given that every industry is getting disrupted, and that tech talent and startup solutions are more prevalent in the south of India, it might be that we will again see a shift in the next two decades. Only time will tell.(The author is CEO, MediaCom South Asia)

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