Growing internet penetration and data consumption is likely to help increase digital advertisement spends in India at 30.8 per cent CAGR between 2016 and 2021. Mobile advertisement spends and social media-aided digital video advertisement spends are expected to grow at 50.9 per cent and 40 per cent CAGR between 2016 and 2021, respectively, according to a KPMG India’s report titled ‘The Digital First journey’.
Addressing the growing challenges that over the top (OTT) platforms are facing in remaining ‘on-demand ready’ in a hyper-competitive landscape, the report said that the digital video ad spend is expected to reach Rs 74.4 bn in 2021 against Rs 13.8 bn in 2016.
Video advertisements, currently about 18 per cent of the digital ad spend, are expected to grow at a CAGR of 40 per cent by 2021. Non-metros now account for almost 30 per cent of YouTube watch time, backed by regional content, better devices and increasing internet access.
An average consumer spends about 3 to 5 hours on media per day, of which 35 per cent time is spent on digital media consumption on mobile phone. Video currently accounts for almost 50 per cent of the data traffic and is set to increase to 75 per cent by 2020.
As growth in urban internet penetration moderates, rural India is set to drive the next phase of growth in India. Better digital infrastructure and entry of affordable smartphone segment is set to change the internet landscape in the years to come.
As on March 2017, 34 per cent of all internet users in India were from the rural areas. However, at a 16 per cent internet penetration, the rural base holds significant growth potential. By 2020, 50 per cent of India’s internet users are estimated to be from rural India.
The report gives an insight into the key themes of the Indian OTT market, key pillars of success for an OTT platform, roadmap to a digital transformation journey divided into four significant phases from a digital vision and strategy, customer proposition, business design and execution planning.
Discussing the monetisation models and challenges, the report highlights that while advertisement video on demand (AVOD) remains the primary source of monetisation for the OTT players in the country, the subscription video on demand (SVOD) and freemium models are seeing traction, largely on the back of compelling content, including sports. Sponsored content has also emerged as an important monetisation tool, with brands baking in the advertising messages into the content itself.
The growth in monetisation, though, is partially held back due to challenges around digital viewership measurement and rampant content piracy, which must be addressed in order to realise the true potential of OTT platforms and build a sustainable model in the future.
Further, digital video businesses require high investments, and returns are currently not commensurate given the still evolving business models. Media organisations are currently attempting to bridge the gap between market share acquisition and economic viability, as they attempt to build long-term sustainable digital video businesses.
Key drivers for successful digital transformation:
According to the report, regional language content has emerged as a key focus area for OTT platforms. For a nation with 1,600 dialects, 30 languages and over 234 million language internet users, content in their own language holds significant value for consumers. Regional language users usually face difficulties in accessing English keyboards and have not had too much of a choice when it comes to accessing local language content online.
However, with the continued increase in regional language user base, this is one segment that digital companies cannot afford to ignore. The Indian internet language user base is expected to grow steadily at a CAGR of 18 per cent to reach 536 million by 2021. Roughly 9 out of 10 new internet users in India are likely to language users over the next five years. By 2021, Marathi, Bengali, Tamil, and Telugu internet users are expected to form 30 per cent of the total Indian language internet user base and the number of Hindi internet users is expected to surpass the number of English users.
Highlighting the regional potential, the report stated that nearly 60 per cent of regional language based internet users prefer to consume regional news, with 32 million language users consuming news exclusively on digital media. Further, the video viewership in India is dominated by the regional language user base which is gradually increasing.
Consumers today spend time about 50 to 60 per cent of the average time on Hindi videos, followed closely by 35 to 43 per cent on regional content videos with only 5 to 7 per cent on English. The OTT players are recognising the regional opportunity and thus are planning investments in creating original regional content.