Urgent need of a third-party digital measurement and Ekam can be a strong solution, says Girish Menon of KPMG

Issues such as increasing worries on ad scams, frauds, accountability and lack of measurement may hamper the growth potential of digital advertising, feels the top brass of KPMG.

"Brands need more accountability. Even YouTube is starting to see pushback from the brands and agencies on the amount of ad spends. We think that the lack of a standardised measurement is hurting a big way," said Girish Menon, Partner and Head, Media and Entertainment, KPMG in India.

"Other side of the story is that the growth of user base is so rapid and so exponential that even if there are complaints, the monies are not being completely removed from digital. You can’t afford to miss the digital bus," he added.

The KPMG personnel opined that with 70-75% being grabbed by the two players (read Google and Facebook), even if a lot of companies are seeing their ad revenues being doubled, it’s not a significant thing on the overall digital map.

Data privacy draft is another factor which is expected to impact digital advertising in a bigger way. Menon said, “If measurement and data privacy issues don’t get resolved, you will start seeing some slowdown in the long run. But this impact gets camouflaged since the user base is increasing faster. If data privacy laws get as strict as the draft says, then the whole personalised campaigns bit will need to be relooked.”

Mritunjay Kapur, Head, Technology, Media and Telecom, KPMG in India puts forth his view, saying, “Implementation is going to be key. I don’t think we are equipped well enough to handle consequence management. It’s a great step that takes you towards the digital age.”

Adding further on the cookie-based marketing being affected, he said, “Cookie-based marketing is related to the ‘do not disturb’ regulation of TRAI. One can choose to be traceable on cookie-based marketing. The relevance of this is going to go down. The one place where this worked very well was at the enterprise level. The whole purpose is to influence a person without them knowing it.”

The KPMG report mentioned that while the telco-based reach is increasing, the ad revenues are getting a hit on account of falling CPMs due to increasing ad inventory and the lack of standardised, third-party validated, digital measurement tool.

How far does BARC’s Ekam look like a solution to this?

Menon said, “Ekam is definitely a solution to it. I am hoping that it will come out next year. It is important that it is released soon, since it will address the digital measurement issue and will ultimately enable cross-platform measurement.”

KPMG’s annual projections report on the Indian M&E industry expects the industry to grow at a CAGR of 13.1%, by FY23. Digital, films, animation and VFX, gaming and OOH are expected to grow slower than they did in the last five years. Print, television and radio are seen to be growing at a faster rate in the next five years.

Overall, digital advertising is also expected to grow at a slower pace of 30%, against an existing 35% growth that it showed in the last five years.

OTT

The video OTT revenue stands at Rs 21.5 billion as of FY 18, which is expected to grow at a CAGR of 45%, to reach Rs 138.1 billion by the end of FY23. Within this Rs 21.5 billion, about 80%, is ad revenues (Rs 17.2%) while the rest is subscription revenues. By FY23, the subscription revenues are expected to be about 33% of the total revenues at that time. This shows the growth at 60% CAGR.

One of the major challenges in growing subscription revenues on OTT is that the consumers are habituated to having content for free. As Kapur said, “The OTT content is now being offered for free through the telco pipe, because then data gets used up. But this is now coming out to be a huge struggle for both the content providers and the teleco players. Because this is making it difficult to take the ARPUs up for everybody. This is also because the content availability on traditional media is very cheap, despite plethora of content available there. Hence, free content was the only way to drive the depth in the digital content reach.”

Digital OOH and print

Digital OOH is merely 1% of the total OOH revenues in India, against a healthy 30-35% globally. Menon said, “While OOH players are investing heavily on this as of now, RoI on OOH is very difficult to measure and hence OOH companies are also wary of how much should be invested overall. But it is one of the key growth drivers.”

OOH is also expected to grow slower than how it had in the last five years. Menon explained that it is also because of the growth of digital. He said, “As digital starts getting measurement, its spend will multiply faster. Though it’s not directly eating into OOH on a one-to-one ratio, unless OOH transforms itself and comes with a new measurement models, it will grow at a factor of economy. There is nothing special happening in the field, to give it a sudden jump.”

Print is projected to grow at a CAGR of 5.9%, against a current CAGR of 3.4%. “Two underlying facts give us more confidence on it. The last IRS has shown a growth, against the negative growth that’s being registered globally. Second is that there is still headroom for growth, since the penetration is still at 60%.” said Menon.

Growth challenges of TV

While digitisation of the cable TV was expected to push the subscription revenues significantly up for the broadcasters, the benefits aren’t being realised just as yet and just as much. How much is that an impact on the growth of TV?

Menon said, “Things were subdued in the last few years because what was expected to happen on digitisation in a smooth manner hasn’t happened that easily. Seeding the boxes, offering packages, consumers picking what they want to watch, ARPUs getting re-aligned and start increasing – this was the way it was supposed to happen. However, seeding of the boxes itself has taken over six years, against a three-year planned window. The tariff regulation and the pricing compulsion are also expected to drive some level of uniformity, though it might take a little more time for it to get implemented.”

He further added, “What this means is, what was supposed to help broadcasters realise its benefits about two years ago, will now happen may be two more years later. So, there will be a positive impact because digitisation gains starting to come through in a longer run.”

One of the major drivers of growth being regional, rural and FTA consumption, how has this suddenly seen a lot of attention? Menon said, “The economy is expected to grow by 7-7.5% in next two years.

Traditionally, advertising has been about 1.3-1.5x of this. We are talking about a 10% growth just because of the economic indicators and the India consumption story remains strong. On top of this, because the depth is increasing and more rural/ regional is happening, an incremental benefit on advertising will come. The FTA markets which weren’t served well and aren't getting enough attention from the advertisers are now attracting the same.”

Having said that, despite there being a huge headroom to grow in the regional areas, the ad rates on regional TV are still quite miniscule. Is regional still a volume game, than a valuation game?

Menon agrees and believes that this will change. He explained, “There was no need, historically, for advertisement demand to be focussed directly on regional markets. Earlier, in view of getting reach, the advertisers were focusing on the Hindi content since that gives maximum reach. Now people are realising that these market will start getting saturated in some time. With the measurement metrics becoming deeper with BARC adding rural, rural and viewers are now getting located on the map. This has made advertisers realise how they have not focussed on a large market. So, even if there was supply, there wasn’t enough demand for the prices to grow. You will see that as demand increases, you will see prices too going up. It was more of a structural issue.”

Elections are also expected to have a positive impact on the ad revenues. It’s consistently proven that elections have a spike in ad spends, majorly because of the added spending by the political parties. It’s not much to do with viewership that generally drives advertising revenues. It is more about creating demand. News channel viewership does increase, though.

Films are expected to grow slower than it had in last five years. Slowing down of C&S rights is one of the major factors of this projected muted growth. Menon explained, “TV is causing the C&S rights to go down, since it is a cost to the broadcasters. There is also a new discussion about the broadcasters wanting to buy the TV+digital rights, while the rights owner wanting to sell the two separately. That’s also seeing a pushback. It’s causing a flutter in C&S revenue for films.”

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