The Hindu Business Line : Real estate cos sustain ad industry growth

Infrastructure and real estate companies have been primarily responsible for the advertising industry sustaining its double digit growth rate estimated at 15 and 20 per cent this year. However, in general, companies and brands have been increasing their expenditure on advertising.

“It has been a fantastic year for advertising as business has been phenomenal. This has been due to the fact that there have been a number of companies, which have begun to advertise for the first time. At the same time, expenditure on advertising has gone up by over 20 per cent and that’s my conservative estimate,” states Mr R. Balakrishnan (Balki), newly-designated Chairman of Lowe India.

New companies, especially in the infrastructure sector, have begun to advertise. They include companies ranging from those building airports such as GMR to a real estate major such as India Bulls. While unconventional advertisers in the construction and real estate sector have jumped on to the advertising bandwagon, the FMCG industry, which has always relied on advertising to build its brands has raised its spends in the past year.

As Mr Balakrishnan observes, HUL has increased its ad spends this year. “We continue to have 35 per cent of the revenues contributed by the FMCG companies.” So while the usual advertisers have been increasing their ad spends, there are exceptions such as consumer durable players who have been conservative this year. “The ad spends by durable brands has remained constant this year although high spends have been made by financial services, infrastructure, insurance and FMCG companies,” says Balakrishnan.

Investment

On the year gone by, Mr M.G. Parameswaran, Executive Director, Draft FCB Ulka, says: “The overall advertising business has grown by about 12 to 15 per cent this year, driven by telecom, financial services, auto and infrastructure. Clients are willing to invest in advertising given the robust growth in many sectors.

“The industry growth has been driven by new categories and inherent market momentum. However, talent shortage is not a new issue and it will become better in the short run. Companies need to evolve systems to ensure that there is a flow of talent into the system. Besides, India is on the global map of all advertising majors. Not only is India seen as a big emerging advertising market, Indian talent and management is seen as very good. So, we have seen some of our key managers taking on greater global roles and this is going to increase over the years.”

Good year

Describing the year gone by as a “good” one, Mr Sam Balsara, Chairman and Managing Director, Madison Group, says: “At the beginning of this year, we had projected that the industry would grow at 18 per cent. I think it has managed to grow at 20 per cent. The Indian economy has been on a roll and that has formed the backbone of the advertising industry. In fact, individual companies are setting ambitious targets and getting optimistic about the future and that is good for the advertising industry. Real estate companies were the new big boys on the block this year.”

However, talent has been steadily moving away from the advertising to more lucrative industries such as telecom and films.

As Mr Balsara says, “One of the key things this year has been the constant movement of people from advertising to more remunerative pastures.”

Growth

According to an advertising outlook report released by the London-based Zenith Optimedia, India’s total advertising expenditure will be Rs 26,532 crore in 2008 in comparison with Rs 22,721 crore this year, recording a 17 per cent growth.

However, Madison’s Balsara predicts 2008 will see slower growth rates. He says “In absolute terms 2008 might have similar levels of growth and it could even be a percentage lower as the base is getting larger for the industry.”