Demonetisation to slow down digital ad spends in 2017

While demonetisation has impacted ad spends of brands in 2016, its impact is well expected to continue for the first quarter of 2017. This was evident in GroupM’s recent ad spend report where it was forecast to grow by 10% in 2017. This is compared to a 12% growth in ad spends in 2016, which was brought down from 14% as demonetisation hit at the end of the year.

The media agency in its biannual advertising expenditure futures report ‘This Year Next Year’ (TYNY) 2017, forecast India’s advertising investment to reach an estimated Rs 61,204 crore in 2017. India remains one of the fastest growing ad markets globally.

While impact was evident on traditional media such as TV, Radio and Cinema, the impact on digital ad spends is expected to be greater. Though digital remains to be the fastest growing segment in terms of ad spends it is expected to see a significant reduction in spends in 2017.

The GroupM report estimates that digital ad spends will grow by 30% in 2017, from 47% growth in 2016. Ad spends in 2016 increased to Rs 7,300 crore from Rs 4,950 crore in 2015. In 2017, however, it is expected to rise to just Rs 9,490 crore. This is a significant reduction in growth of digital at a time when virtually all ad and media agencies have been predicting over 50% growth for digital.

While 80% of incremental ad spend growth in major markets comes from digital media, in India the numbers are more evenly split between traditional and digital media. Digital media accounts for about 40% of the incremental ad spend growth, said the report.

In comparison, other traditional media saw a smaller decline in growth expected in 2017. The ad spend growth in TV is expected to decline to a single digit growth in 2017 from double digit growth. TV ad spend growth was pegged at 8% in 2017 from 10% in 2016. It accounts for the largest chuck of ad spends on media. Ad spends on TV will grow to Rs 27,378 crore in 2017 from Rs 25,350 crore in 2016. 

Radio is expected to grow at a little over 10% in 2017 from a 12% growth in 2016. Ad spends on radio will rise to Rs 2,464 crore in 2017 from Rs 2,240 crore in 2016.

Ad spends on cinema will grow only by 20% from a large 37% growth in 2016. It is expected to account for Rs 672 crore in 2017 from Rs 560 crore in 2016.

The print medium, on the other hand, is expected to grow by 4.5% in 2017, this is an increase from the 4% growth in 2016. Ad spends on print are expected to grow to Rs 18,258 crore in 2017 from Rs 17,472 crore in 2016. The increase in ad spends expected from print heavy sectors like Auto, BFSI, e-wallets will contribute to this growth.

Out of Home media too is expected to a growth in ad spends to 7% in 2017 from 6% in 2016. It’s ad spends will rise to close to Rs 3,000 crore from Rs 2,750 crore in 2016.