The message on a huge billboard at a suburban railway station here is clear and one of several saying the same thing: Contact the following number for this site. Across rail stations and main roads in this financial capital, billboards lie vacant. A reminder that the Rs 26,000-crore advertising industry is still not out of the woods.
Ad and media industry executives expect a weak 2012 calendar year. Preliminary estimates seem to corroborate the feeling. According to Madison Media, the industry is likely to grow at nine per cent this year, just 100 basis points more than the growth reported last year. Of the various segments, only television, internet and cinema advertising are likely to see double-digit growth, says the agency in the annual Pitch Madison Media Advertising Outlook.
TV will see about 10 per cent growth, while internet and cinema will see nearly 50 and 15 per cent growth, respectively, adds Punitha Arumugam, chief executive officer, Madison Media Group. But the growth that internet (or digital advertising) and cinema will see is on a small base, say experts, since both constitute just about five per cent and 0.5 per cent of total ad spends in the country. In contrast, TV advertising is nearly 42 per cent of total spend, while print and outdoor make up 43 per cent and five per cent, respectively, of the total. Radio and retail advertising constitute the rest at four per cent and 0.5 per cent, respectively. All these segments (namely print, outdoor, radio and retail) will see only single-digit growth, says Arumugam.
Clearly, the current estimates hardly bode well for an industry expecting a recovery on the back of a resurgence in advertising by consumer goods companies. The year 2011 saw fast moving consumer goods (FMCG) companies cut advertising to rein in margins, which were eroding due to inflationary pressure and allied operating expenditure. This year, companies are expected to keep advertising expenditure at 11-12 per cent of sales, a healthy figure, given the competitive pressures in the segment.
R Sridhar, chief financial officer, Hindustan Unilever, the largest advertiser in the country, had indicated as much at the company's third-quarter results this January. He’d said ad spends would have to be tweaked, based on the competitive scenario around. With most FMCG companies reporting top line growth in excess of 15 per cent during the third quarter of the current financial year, analysts say there is unlikely to be a let-up in new launches by most in the coming quarters. Which means their advertising levels will be high.
But the worrisome factor remains the cut in advertising by non-FMCG companies such as retail, real estate, auto and telecom. These categories, especially retail, real estate and auto, are also heavy spenders in print and outdoor ads, say experts.
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I Venkat, director, Eenadu, a veteran in the publishing business, says February was particularly bad for most print publications. "There was hardly any advertising," he says.
Shubha George, managing director, MEC India, a GroupM entity, says the reason has been the cautious approach taken by advertisers. "They have been careful with their spends," she says.
With purse strings tight, advertisers, say experts, are looking for maximum mileage from the choices they are making. This is visible with the fifth edition of the Indian Premier League cricket tournament, to be telecast on SET Max from April 4. Advertisers have been slow to pick up sponsorship slots. Rohit Gupta, president, Multi Screen Media, the owners of SET Max, say the deals will be closed by March 15. Analysts say by this time last year, advertisers were already in place for both presenting and associate sponsorships.
While Gupta declined to comment about the sponsors on board, analysts say Vodafone is one of the presenting sponsors this year. Of the associate sponsors, Pepsi and Samsung are said to have given their go-ahead.