From Chandrayaan-3 to Ad Boom: Indiaâ€™s advertising odyssey

Global advertising expenditure is anticipated to increase by 4.4 per cent in 2023, reaching a total of $963 billion for the year, according to a study conducted by global market research firm WARC. Furthermore, it is projected to experience an even more substantial growth of 8.2 per cent in 2024. This growth trajectory is significant as it will mark the first time the advertising market exceeds the milestone of $1 trillion.

The South Asian advertising market is witnessing rapid expansion, and this growth is being propelled by a robust Indian market. Forecasts indicate that advertising spending in India is set to achieve double-digit growth over the next 18 months, ultimately reaching a total of $13.7 billion in 2024.

Despite facing challenges such as high interest rates, escalating inflation, military conflicts, and natural disasters in the past year, the latest earnings season reveals that the advertising industry has not only weathered these turbulent times but has also begun to rebound.

James McDonald, Director of Data, Intelligence, and Forecasting at WARC, noted this positive turn, stating that high interest rates, spiraling inflation, military conflict, and natural disasters have created a challenging environment over the past 12 months. However, he adds, the recent earnings season demonstrates that the advertising market has emerged from this turbulence and is now on an upward trajectory.

Adgully seeks to understand the key factors identified in the WARC report that are driving the projected increase in ad spend in India to $13.7 billion by 2024.

“There are a number of key factors driving growth in India, notably the fact that we have the fastest-growing major economy,” says Poran Malani, Country Director, S4 Capital (Media.Monks & DDM India).

“With an election on the horizon and a firm steady GDP growth forecast, advertising and marketing spend is looking very positive. It has not been an easy few years, but as some analysts have pointed out, India is on a very strong seven-year cycle. It is this long-term confidence which is allowing brands across sectors to invest heavily in growing market share. At the same time, there is a renewed confidence in India in terms of tech leadership, especially with the success of the Chandrayaan-3 lunar mission. This, in turn, is already creating a huge inward investment into advanced tech in the country. In short, India is coming of age both domestically and internationally,” notes Malani.

According to Siddhartha Vanvani, Founder & CEO, Digidarts, the projected surge in India’s ad spend to $13.7 billion by 2024 is defined by several key factors. He points out, “These factors include a burgeoning economy coupled with escalating disposable incomes, a youthful demographic with heightened digital awareness, the upsurge in e-commerce and digital transactions, augmented smartphone and connected device adoption, and the escalating favouritism for OTT platforms. These influences collectively drive the upward trajectory of ad investments, reflecting the dynamic landscape of evolving consumer behaviours and technological advancements.”

In light of the WARC report, it’s quite intriguing to observe the anticipated surge in India’s ad spend, projected to reach an impressive $13.7 billion by 2024, says Saurabh Gupta, Founder and Managing Director, Garage Group. “The factors driving this growth are undoubtedly captivating. The Indian market’s resilience, propelling South Asia’s overall growth, stands as a significant catalyst. The allure of global giants like Alibaba, Alphabet, Amazon, Bytedance, and Meta further adds to the landscape’s dynamism. The report’s insights into the digital domain, particularly the ascendancy of social media with Meta’s prowess, hint at a fascinating shift in consumer engagement. The blend of traditional media and digital avenues creates an evolving narrative that advertisers will need to master. All in all, the journey to achieving these projections could potentially redefine advertising strategies and reshape the industry playbook,” Gupta adds.

Sectors/ categories contributing to rising ad spends

What are the industry sectors or categories that are expected to contribute significantly to this rise in ad spend? Are there any specific trends driving this growth?

According to Saurabh Gupta, the rise in ad spend in India is expected to see significant contributions from specific industry sectors and categories. He notes, “Social media is poised for exceptional growth, accounting for over a fifth (21.8%) of total spending, with Meta leading the way due to its dominance in the social media market. Retail media is also set to flourish, with Amazon projected to hold a substantial share of retail media spending. While Connected TV (CTV) will see an increase, linear TV might face a dip this year; yet, it could be boosted by political and sporting events in 2024. Search advertising is predicted to play a substantial role, with Google remaining the dominant player.”

According to Siddhartha Vanvani, prominent sectors poised to notably bolster the surge in ad expenditure encompass e-commerce, FMCG, retail, automobile, telecommunications, and technology. According to the report, he adds, 2024 is anticipated to be the year when the financial services sector (+11.5%) is poised to lead in rapid expansion, trailed closely by technology & electronics (+11.3%), and [pharma & healthcare (+11.0%). This upswing can be attributed to several pivotal trends propelling the surge. “Noteworthy among these are the burgeoning preference for online shopping, the escalating desire for packaged consumer goods, the widening footprint of the retail domain, the robust demand for smartphones and electronic gadgets, and the progressive integration of digital innovations. These trends collectively underline the substantial role these industries play in elevating ad spend, closely aligning with the evolving preferences and habits of the modern consumer landscape,” he adds.

Poran Malani thinks that when you look at structural growth as opposed to frictional short-term growth, you need to start with the housing and corporate building business. “Here, we are seeing massive rises in investments. Rents and property prices across the board are increasing and this is always a healthy sign of confidence. Fintech has suffered over the last year but will soon rebound as digital portals grow with e-commerce. Education has also had a rough couple of years. but we are seeing new entrants in this area. Health and wellness is a booming area and of course, the EV mobility sector is going gangbusters. Pretty much every sector from traditional FMCG to new hi-tech is growing. We are also seeing a number of India-based brands looking to explore launches in international markets and that is something we are working on a lot,” he explains.

The role of advertising

In the context of this report, digital advertising and traditional media play a great role in the overall ad spend landscape in India, say experts.

Digital advertising and traditional media play a complementary role in the overall ad spend landscape in India, points out Siddhartha Vanvani. According to him, digital advertising is expected to grow at a faster rate than traditional media, but traditional media will still account for a significant share of ad spend. According to the report, he adds, in the coming year, social media is poised to emerge as the swiftest-expanding medium, experiencing a surge in expenditure, reaching an impressive total of $227.2 billion, which constitutes approximately one-fifth (21.8%) of the entire spending landscape.

“A substantial share of this growth – about 64.4% – is expected to be claimed by Meta. Meanwhile, within the realm of advertising channels, retail media is also positioned as one of the frontrunners in rapid expansion. With an expected 10.2% increase in spending this year and a further 10.5% rise in the subsequent year, the cumulative expenditure is projected to hit $141.7 billion, representing 13.6% of the overall expenditure. Notably, Amazon is anticipated to capture a significant portion of this growth, accounting for around 37.2%. The shift in allocation between digital and traditional media is being driven by the increasing popularity of online platforms, the growing reach of smartphones, and the changing media habits of consumers,” observes Vanvani.

Poran Malani is bullish on digital. He notes, “When we started three years ago, it was around 30% of budgets. Today, it is upwards of 40-45%. Now most of that is still in the programmatic area, but with AI and machine learning we are seeing brands develop more sophisticated digital strategies, focussing on community building where real brand value can be created.”

Digital advertising and traditional media play distinct roles in India’s ad spending landscape, says Saurabh Gupta. “The report highlights the significance of social media as the fastest-growing medium, with Meta’s platforms shaping this growth. Meanwhile, retail media and search are expected to contribute significantly, and Google is anticipated to retain its dominance. Traditional media experiences shift, as linear TV might decline this year, but rebound due to special events in 2024. While outdoor, cinema, and audio are expected to witness spending increases, publishing media, including newspapers and magazines, could experience losses,” he adds.

Regional distribution

Now let us look at the regional distribution of this projected ad spend. Are certain regions or cities expected to experience higher growth rates compared to others?

Siddhartha Vanvani feels that North India should maintain its status as the foremost advertising market in India, closely followed by South India. East and West India are poised for accelerated growth, surpassing the expansion rate expected in Central India. “This regional divergence in ad spend growth can be attributed to an array of catalysts, including regional economic vitality, population density, urbanisation extent, and media and internet accessibility. The amalgamation of these influences underscores the complex interplay of factors influencing ad spend dynamics in distinct geographical pockets,” he says.

The projected ad spend distribution across regions in India showcases the country’s strong growth potential, feels Saurabh Gupta. “With a predicted ad spend growth rate of 10.3% in 2023 and 12.4% in 2024, India’s surge is expected to drive the larger South Asian market. Specific regions or cities within India are not explicitly mentioned in the provided information. However, considering India’s size and diversity, major metropolitan areas and regions with thriving economies might contribute more significantly to this growth.”

“If you look at current trends we see a huge growth (albeit from a smaller base) in regional and tier 3/4 cities and even beyond. Again this is enabled by AI and the ability to really create localised messaging on a micro scale. Regional vernacular is becoming a key digital driver,” says Poran Malani.

Potential challenges

Considering the evolving consumer behaviour and market dynamics, advertisers and marketers face certain potential challenges or risks in achieving the projected ad spend figures. It is essential for businesses to adapt their strategies to navigate these challenges effectively.

According to Siddhartha Vanvani, the potential challenges or risks that advertisers and marketers might face in achieving the projected ad spend figures include:

The evolving consumer behaviour
The increasing competition
The rising costs of advertising
The regulatory challenges

“To navigate these challenges effectively, businesses need to be flexible and adaptable. They need to be constantly innovating and experimenting with new ways to reach and engage consumers. They also need to build strong relationships with their partners and stakeholders,” he says.

Vanvani lists out some specific strategies that businesses can adopt to address these challenges:

Focus on creating engaging and relevant content: Businesses need to create content that is relevant to the interests of their target audience that will capture their attention. This content can be in the form of videos, images, text, or even interactive experiences.
Use data-driven insights to inform their advertising strategies: Businesses need to use data to understand the behaviour of their target audience and to identify the most effective channels and messages for reaching them.
Partner with influencers and other relevant stakeholders: Businesses can partner with influencers and other relevant stakeholders to amplify their reach and to build trust with their target audience.
Be flexible and adaptable: Businesses need to be prepared to adapt their strategies as the market changes. They need to be willing to experiment with new ideas and to take risks.

This really depends and it is hard to give a simple answer, says Poran Malani, adding, “What we see, however, is that it can be a little confusing out there at the moment. This in turn can lead to a scattergun approach where brands try a little of everything without really being in control of the “golden thread”, which holds things together. The plethora of platforms and techniques allows us to test and learn and then scale, follow that simple path and things should become easier.”

Advertisers and marketers face potential challenges in achieving the projected ad spend figures due to evolving consumer behaviour and market dynamics, says Saurabh Gupta.

“The rise of ad-blocking software and increasing concerns about privacy could hinder digital advertising effectiveness. Moreover, the competitive landscape among major players like Alibaba, Alphabet, Amazon, Bytedance, and Meta might impact smaller advertisers. Adapting strategies to navigate these challenges effectively involves embracing innovative ad formats, focusing on personalized and relevant content, and being mindful of consumer privacy concerns. Diversifying advertising channels and optimising investments in social media, retail media, and search could also help navigate these shifts in the advertising landscape,” he concludes.