Experts voice optimism for H2 inspite of Indian AdEx decline seen in H1

Indian AdEx has been affected by macroeconomic conditions and dip in IPL spends in the first half of the calendar year. Social Samosa speaks to media experts to find out their outlook for the second half of the year.

The major revenue drivers of the Indian AdEx have suffered from minor setbacks, brought about by the macroeconomic impacts of inflation and interest rates. According to GroupM’s TYNY report, the macroeconomic environment has led some markets to trim expectations for 2023 as compared to the previous forecast, including India which is now expected to see 12.0% compared to the December forecast of 16.8%.

Another report by Elara Capital paints a similar picture. It said that the Indian AdEx is seeing pressure in H1CY23, given inflationary headwinds and macroeconomic uncertainty.

The IPL Impact

Even a property like the Indian Premier League (IPL), the most compelling sports tournament which brings in a significant chunk of revenue in the first half of the calendar year, observed a steep decline in overall ad revenue ~30%-35%. 

Considering this, Elara Capital’s report said that India AdEx growth could be revised downwards to ~10-12% (including the positive impact of the Cricket World Cup – ~2%) in CY23, from an estimate of ~16% YoY growth projected by larger ad agencies. 

This drop in expectations by 4.8%, coupled with the decline in IPL’s decline in ad revenue, has affected the buoyancy of the ad industry in H1 CY2023. 

Namrata Soni, Associate Director – Media Planning & Buying, DENTSU CREATIVE India said, “Although IPL remains one of the top Sport events in India, uncertainty in the financial markets and expected economic slowdown resulted in restricted marketing budgets across brands and categories. Larger share of marketing budgets was utilized for more result and performance-driven activities in H1. This caused a decline of ~30-35% ad revenue from IPL in H1.”

Report from Elara Capital credits this decline in IPL to advertising dollars being split between TV and digital, and new age/e-commerce companies cutting ad spends to focus on profitability. 

Apart from e-commerce brands, this IPL, a few important categories were missing. From start-ups and cryptocurrency to Edtech, these brands usually open their purse strings during India’s biggest sports event. This withdrawal of ad spends from major categories is expected to affect World Cup ad spends too. 

“App-based categories like FinTech, EdTech, gaming were the cause for IPL seeing a dip in spends and could also cause a dent during World cup,” said Vinay Hegde, Chief Buying Officer, Madison Media.

Mithun Cotha - SVP - Data & Insights, GREY group India told Social Samosa that headwinds from a macroeconomic standpoint globally could have reflected on the IPL budgets for certain brands. 

“Brand experts say there has been a Funding Winter in the ecosystem, increasing focus on business growth, and more so for emerging categories. With brands that we at Grey saw during IPL appeared to have gained momentum and exposure,” said Cotha.

New-age companies, as per Elara Capital, are expected to report a decline of 20%-25% on their ad budgets, which will have a negative impact on overall India’s AdEx. 

The story has not yet reached its end, reminds Amyn Ghadiali, President - Business & Integration, GOZOOP Group. He says that it is crucial to assess trends comprehensively and not solely based on isolated annual data, as a vibrant and dynamic market is indicative of good health.

“Despite recent challenges, the advertising industry maintains an optimistic outlook. Also, I think that one should not write off crypto completely, not yet,” said Ghadiali.

Also read: Barbie Movie Marketing: How Mattel is reclaiming pink…

Hopes Pinned On Festive Season

A similar pattern of decline is seen in other international markets like Australia (from 3.4% to 0.2%), Canada (from 8.0% to 5.0%), France (6.3% to 4.2%), Indonesia (from 9.7% to 6.7%), and Hungary (from 8.0% to 1.0%). 

However, India has its ace card yet - the festive season. All hopes are now pinned on the second half (H2CY23) of the year and experts are optimistic about advertising’s outlook.

“While advertising has still not shown a great buoyancy, the first quarter definitely shows an improvement. Growth this year will be largely driven by elections and cricket on traditional mediums,” said Hegde.

H2CY23 is expected to showcase respite as larger verticals like FMCG, auto and telecom (44% contribution to total TV, Print & Radio Adex) are expected to drive ad spends momentum on the back of multiple new launches, predicts Elara Capital. With inflationary pressures cooling off and a better festive season; Elara Capital expects TV medium to be a big beneficiary of this, as these verticals advertise heavily on TV (54% of TV adex is from these verticals). 

Soni is also expecting momentum from new launches. 

“With the festive season and World Cup coming up, we can expect the ad spends towards branding activities to pick up the pace once again, especially driven by the top 5 categories and new product launches,” said Soni.   

Apart from that, alcobev category, which contributes to about 0.7% of TV adex, could be one vertical that may see strong growth in ad spends in H2CY23. 

TV will also see an uptick in advertisers’ interest during the general election. News channel report a jump in viewership during the elections, attracting more brand investments. 

Sharing his positive outlook for TV, Karan Taurani, Senior Vice President – Research Analyst, Elara Capital, said in the report, “We continue to remain positive on TV AdEx in India, as the latter drives a bigger reach and is favourable for large traditional brands which look for mass campaigning; TV AdEx will see convergence towards growth rates of ~5-6% over medium term, which is already factored into our estimates for Z and SUNTV. However, our current estimates for ad revenue in FY23 may see a downward revision, as TV AdEx is estimated to move back towards 90% recovery v/s pre COVID levels, as compared to a 96% recovery in FY22.”

Taurani further said that TV remains to be a big beneficiary of the general elections in FY24 and growth rates therein will magnify in FY24, towards 10-12% YoY growth. 

Hindol Purkayastha, Executive Vice President & Business Head of North & East, L&K Saatchi & Saatchi said if we analyse the spends during IPL, enough and more brands still push their ads on General Entertainment Channels (GEC’s) and News Channels.

"But with the festive season and elections kicking in, I am assuming there would be a clamour for spots on alternatives too. We will have to wait and watch which brands will play in what genre of TV channel," said Purkayastha.

On the digital front, the launch of 5G is expected to give a further push to the industry’s growth. 

“Despite this drop in ad spends, I feel the advertising industry is cheerful compared to last year and continues to be amongst the top 10 fastest growing markets, globally. I feel the launch and expansion of 5G services beyond top metros, combined with affordable smartphones, is also expected to drive ad spend growth in India and we may see digital ad spend is way above any other mediums in a few years,” said Rishabh Mahendru, VP, Client Success, AdLift.

Sarfaraz Ansari, Senior Vice President – Integrated Media, DDB Mudra Group said that both TV and digital are also likely to benefit from elections and World Cup, with sports and news genres piquing advertisers’ interest.

“Past few years, news as a genre just saw Covid numbers. With Elections & the twist in the Election, both Digital as well as Television-based news channels are bound to perform better,” said Ansari.

Speaking about overall spends, Hedge said, “Ad spending across mediums seems to have recovered to better than pre-pandemic levels and while it may be a tad early to comment, it looks definitely probable that the spends will exceed 2022 levels.”

World Cup to be a Revenue Driver

In the second half of the year, apart from festive season, World Cup is the most anticipated event. 

This time, Disney+ Hotstar is airing the tournament for free in five languages and advertisers are optimistic about seeing an expanded user base and are expecting 450 million viewers, that is double than last season.

“The focus right now is on H2 of 2023 and H1 of 2024 where most of the major crowd-pulling events will be happening like cricket, world cup, festivals and general elections,” said Mahendru. 

During the second half of the calendar year, it is not only the festive period uplifting consumer spirits, rural India reports a better sentiment due to monsoon. With a slight decline in ad spends in the first half, all hopes lie on the rest of the year to turn the tides in advertising’s favour.