Ad spends to grow by 6% in FY24, signaling a muted year: Redseer Report

Redseer Strategy Consultants has launched a lighthouse report in an ever-evolving digital advertising landscape. The report outlines how Digital Advertising platforms are evolving and addressing the maturing demand of advertisers and puts forth 5 key trends that are expected to take shape over the next two years. At the outset, Redseer’s research reveals that FY2024 is likely to be a muted year for advertising spend with a ~6% growth and is expected to touch US$16-17 billion in  FY2024, owing to a slowdown in consumption observed in the last 5-6 quarters as well as a dip in PE/VC investments because of rising interest rates and geopolitical tensions. Additionally, the advertising sector is recovering from the impact of the 28% GST levy on the Real Money Gaming format.  

The report also notes that despite macroeconomic headwinds leading to most consumer sectors controlling their ad spending, eCommerce platforms continue to spend in FY2024, estimated at ~15%  growth in spending this fiscal. The emergence of digital-first brands, programmatic advertising as well as the evolving offerings of digital ad platforms is shaping the course of Advertising as we know it. Digital  Advertising is well on its way towards amassing a significant user base of 800 million internet users which will fast surpass Television viewership in 1-2 years. This demographic is spending almost 1/3rd of their waking hours on the internet.

Retail Media and Challenger platforms are fast growing in digital advertising, and content formats are  shifting more towards video and interactive 

The digital advertising market in FY2024 is expected to remain muted at a ~6-7% growth rate and reach US$  8.8 - 9.3 bn in the fiscal, with global platforms such as Alphabet and Meta set to moderate their market share from ~62% in FY2023 to ~60% in FY2024. Retail Media platforms like eTailing and Hyperlocal, on the other hand, are expected to grow at ~20% in FY2024 and increase their market share from ~18% in  FY2023 to ~20%. Content-based platforms are set to continue retaining their ~20% share this Fiscal. The  Report notes that Advertisers are increasingly spending on Challenger platforms like Retail media and content platforms with niche offerings owing to multiple factors like specific targeting of high-intent users, greater reach within Tier-2 audiences and increased attention span on the platforms. Of all the platforms, Hyperlocal platforms, which have already exhibited a 70% increase in Ad Revenue CAGR  between FY21-23 and Short Form Video platforms (which have exhibited a 50% Ad Revenue CAGR  increase) are the fastest growing. eTailing and OTT are two other hypergrowth sectors for advertisers to watch out for. 

The report also reveals that Challenger Platforms compare differently across various parameters of the marketing funnel. For instance, brands might see higher rates of Retention and Conversion on eTailing and Hyperlocal platforms whereas Awareness might not be on par. OTT Video, Audio and SFV on the other hand performed well in the Awareness and Consideration parameter but were less favorable in terms of Conversion and Retention. 

CPG & Retail, eCommerce, Gaming, Media & Entertainment and Consumer Durables are the top 5  Consumer sectors for Digital Ad Spending 

In FY2023, Retail-led sectors consisting of the CPG & Retail, eCommerce, Consumer Durables &  Electronics as well as Automobile categories accounted for 60% of the digital ad spend. Content &  Service Sectors accounted for ~27% of the advertorial spend in the USD 8.2 – 8.7 Bn market. FY2024 is set to witness digital disruption within the Consumer sector with greater spends from digital-first brands, and legacy brands making the digital pivot. According to the Report, eCommerce, Travel &  Hospitality and Consumer Durables sectors are expected to increase their ad spends in FY24 with customer retention in view.  

Digital advertising is projected to grow at 11-12% for the next 4 years to become US$~14 Bn in FY2028; 5  Key Trends to take shape in the next two years as consumption rebound 

The rebound in consumption and growth across sectors will be shaped by the rise in urban demand and the gradual recovery in rural demand spread across the next 12-18 months, catalyzing advertorial spending at a CAGR of 9-10% over the next 4 years to become US$ 23-24 Bn in FY2028. Digital advertising would continue to outgrow the market growth at a CAGR of 11-12% and account for ~60% of the overall advertising market in FY2028. 

As the sector looks to chart its way forward, five key trends are expected to take shape in the next 2 years:  

• 1. The rapid growth of Influencer Advertising owing to the cost-efficiency of the format 2. An Increase in advertising expenditure towards Tier-2+ audiences 
• 3. The faster growth of Performance Ads supported by Analytics tools
• 4. Maturing Programmatic Play led by a focus on contextual advertising 
• 5. The integration of GenAI across the advertising value chain 

Mukesh Kumar, Associate Partner at Redseer observes, “As digital natives shape consumption patterns across the nation, brands have a never-before opportunity to address a much-larger and diverse consumer pool through advertising. The rise of challenger platforms has defined the growth in digital advertising in FY2024 and is expected to remain so in the next years or so. It will be fascinating to witness  cutting-edge creative strategies take shape across platforms, especially with the possibilities that  programmatic advertising and GenAI can offer for the sector.”