India is 5th biggest contributor to global ad spend growth: CVL Srinivas

GroupM’s ‘This Year Next Year’ 2016 report, released on January 19, 2016, remains optimistic on India’s AdEx growth. Speaking to Adgully at the launch of the report, CVL Srinivas, CEO, GroupM South Asia, spoke about the growth drivers for the advertising industry in India, growth in the traditional media channels, and why India remains buoyant.

Adgully gets into conversation with CVL Srinivas, CEO at GroupM South Asia. Edited excerpts from the interview:

Adgully (AG): Key growth drivers for the advertising industry in India in 2016

CVL Srinivas (CS): At an overall level despite all the global headwinds building up, the Indian GDP is expected to grow anywhere between 7 per cent and 7.5 per cent by all indications. So this is good news. AdEx is estimated to grow at roughly two times the GDP estimate. In terms of individual sectors, we are looking at FMCG, which is still a big contributor to AdEx and continues to invest in brands. They may not grow at the same rate as the previous year, but at the same time we are expecting double digit growth at an overall category level. E-commerce as a category will continue to grow, maybe not as high as last year. Last year perhaps it was at its peak in terms of y-o-y growth. We are seeing some of them taper off a bit, but at the same time it will still remain pretty high, over 25 per cent. Perhaps it may be a year where E-commerce is going to rationalise their spends across different media and infact, perhaps slew more of their spends to digital.

Then you have categories like BFSI, which has seen a lot of developments and regulatory changes; there are newer players who are entering this sector that are expected to spend. We are also expecting more spends from the government sector, not just national schemes and state level schemes, but also the five state assembly elections that are going to happen which will see a spurt in advertising. Then you have the ICC T20 World Cup, which is slated to be held in India in February-March. So all put together, there are quite a few positive factors which have led us to believe that we are on track for a 15.5 per cent growth.

Adgully (AG): Print - still headroom for growth

CVL Srinivas (CS): India is one of the few markets where we have a robust print and newspaper industry. I personally believe there is still headroom for growth. There are a lot of clusters and markets where the medium delivers value for advertisers. Given the sectors that we see that will increase in 2016, most of them are skewed towards Print. We see overall growth from 5.2 per cent to 6 per cent. Having said that, the print industry needs to focus a lot more on measurement and also on ideas to ride the digital wave. Many of them have extremely strong brands and a loyal readership base, but are not able to translate these to digital platforms.

Adgully (AG): But English is not expecting much growth?

CVL Srinivas (CS): We see most of the growth coming from vernacular languages. That has been the trend for the last few years and we see this trend continuing.

Adgully (AG): Do you see programmatic buying gaining foothold in the TV space as well?

Adgully (AG): Where does India stand as far as contributing to global advertising spends is concerned?

CVL Srinivas (CS): India is the fifth biggest contributor to incremental ad spend growth globally. In 2016, there are six markets that will contribute around 75 per cent of the incremental growth and we are one of them. China continues to be the largest contributor, then you have the US, the UK, Brazil, India and then Japan.

Adgully (AG): Traditional media channels

CVL Srinivas (CS): TV continues to perform well. It sees a combination of investment that broadcasters are making in content, marketing and measurement. As far as a diverse market like India is concerned, it still provides extremely cost-effective reach. So that is working for them. As far as print is concerned, regional languages continue to do well going forward, while some of the other brands are actively moving towards digital, which will help them to expand their presence across platforms.

In Radio, we will see a lot of interesting action at the end of this year and probably next year will be a big year because Phase 3 round 1 license will be issued and by the time they get operationalised and radio stations come into play, it will be the third or fourth quarter of this year. So you will see the growth next year. Another interesting trend is growth of Internet radio or radio like apps which are available today. A lot of listenership should be expected on that platform as well.

Cinema is another medium which grew at 20 per cent and we can expect the same this year as well. There is a bit of a slowdown as far as auto form is concerned, but we see that picking up in 2016.

Adgully (AG): Do you see the Rio Olympics this year impacting ad spend in India?

CVL Srinivas (CS): We don’t see much of an impact as far as advertising is concerned. It just gives a minor incremental add-on.

Adgully (AG): In 2016, where do you see the ad spends coming from?

CVL Srinivas (CS): Across sectors, TV still forms a very important component of overall media plans. Either for its cost-effective reach or impact – it provides properties like the IPL, reality shows, blockbuster movies, etc., and this year, increasingly for local and regional advertising as well. We will see a lot more advertiser interest in targeting smaller markets and geographies in local or regional channels. We now have a measurement system which covers rural India as well, it will be an impetus to the growth of local and regional language channels.

I think at the overall level, we will grow at 15.5 per cent. At one level is not much of a surprise because there is so much of positivity as far as the Indian ad sector is concerned. But at other end, one should keep in mind the global headwinds that are building up. So, one should wait and watch on how the first 4-5 months of this year will pan out. So as we said, we will revisit numbers towards the middle of the year to take stock of what has actually happened. Right now we are hopeful, more optimistic and cautious.