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MPA sees ad revenues growing 8.7 per cent in 2012

FMCG spends will remain robust, while the Hindi GECs currently have limited supply of inventory which would help keep ad rates healthy

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BestMediaInfo Bureau
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MPA sees ad revenues growing 8.7 per cent in 2012

MPA sees ad revenues growing 8.7 per cent in 2012

The study says FMCG spends will remain robust, while the Hindi GECs currently have limited supply of inventory which would help keep ad rates healthy

BestMediaInfo Bureau | Delhi | February 17, 2012

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Media Partners Asia (MPA) says the outlook for advertising growth across key categories is mixed. Latest research by MPA says media ad sales will grow by 8.7 per cent in net terms this year in the background of a slowing economy (7 per cent real GDP growth against the historical range of 8-9 per cent) and the high first-half 2011 base last year resulting from the ICC World Cup plus an extended IPL season.

MPA says the growth will be primarily driven by multinationals investing in India and stronger MCG sector, and there could be upward revisions made in H2 2012.

FMCG: Media buyers expect robust growth from the FMCG sector, which is the largest advertising category contributing 30-35 per cent to total ad spend. MNCs are expected to report robust numbers, while a few large MNC accounts (with annual ad budgets in the region of Rs 2-3 billion.) are looking to increase spends by 50-70 per cent for the coming year. Domestic FMCG companies are expected to see only marginal growth as profits of these companies have deteriorated due to rising input costs.

Automobiles: Big players like Maruti Suzuki and Hyundai have reduced ad spends. However, global car manufacturers investing in India are driving overall growth for the sector. As suggested at the recently held Auto Expo 2012, the sector will benefit this year from new launches in the two-wheeler and utility vehicle segments in subsequent quarters.

Telecom: Flat-to-declining spends forecast in the background declining profits.

Life insurance: A forecast of steady growth, a prevailing trend in this category since 2008.

A reversal of interest rates will be the underlying factor influencing consumption and ad spend across sectors. The rising interest rate cycle seems to have peaked out. After raising interest rates by 13 times since March 2010, the Reserve Bank of India may shift its approach towards monetary policy. Inflation is likely to fall considering the high base last year, and in order to bring the country's economic growth back on track, RBI is likely to reduce interest rates gradually in 2012. This will encourage investment and spending, which in turn will benefit the ad market, especially in H2 2012.

Consumption demand has held up reasonably well though rural demand may be a concern going forward, highlighted by a recent slowdown in sales of two-wheelers and durables.

Other key factors that will have an impact on the ad marker include:

Competition in Hindi GEC: Competitive intensity in the Hindi GEC space is nothing new, though new competition is accelerating among second-tier channels. There has been a change in the pecking order of the top three Hindi GEC channels, with Sony climbing to the No. 2 spot while incumbent Zee TV has slipped to No. 4. Based on our discussions with some of the major media buyers, the genre currently has limited supply of inventory, which should keep ad rates healthy. Q1 CY 2011 is also characterised by higher government spending on tourism, education and welfare ads.

Digitalisation: Before the first phase of digitalisation is implemented in June 2012 (it may be delayed to December 2012), broadcasters are already rolling out niche channels in various genres like action and comedy. This will attract advertisers who are willing to target and segment their audience not just on demographic but also psychographic parameters.

FDI in single-brand retail: Opening up of FDI in single-brand retail – a precursor to opening up multi-brand retail – will benefit regional print companies.

State elections: In the near to medium term, print media will benefit from the upcoming closely contested elections to be held in Uttar Pradesh, Uttarakhand, Punjab, Goa and Manipur.

Info@BestMediaInfo.com

Info@BestMediaInfo.com

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