The Hindu Business Line : Ad industry thrives on spends from telecom, FMCG sectors

Mumbai, Dec. 29 The telecom and fast moving consumer goods industry have been the two categories which have sustained ad industry growth rates (estimated at below 11 per cent) for 2008. While the first half of the year saw robust growth rates, the last three months, especially post Diwali, took a hit primarily due to clients becoming cautious and slashing ad spends across sectors such as finance and automobiles.

According to Mr M.G Parameswaran, Executive Director, Draft FCB Ulka, “Clients have become cautious leading to a cut in ad spends especially in the last 3-4 months of the year which have been bad for the ad industry. I expect the industry to recover by the middle of next year only. The financial sector, real estate and retail are some of the categories which have cut ad spends by huge numbers. FMCG is still doing well and its ad spends have grown by 15 per cent.” At the same time, clients would continue to use advertising to build ‘value’ for their brands and agency heads are optimistic about getting business.

As Mr Parameswaran adds, “Indian clients see advertising as a tool to add value across a range of issues and Indian agencies have scored and are competent to deliver.”

While the ad industry grew at a healthy rate in the first half the year, this was offset by the second half when the economic slowdown hit upon a range of industries like banking and insurance. “Telecom spends for both hardware and software have been substantially up and even auto spends were good in the first half of the year. But it was the FMCG category which kept up its head throughout the year,” observes Mr V. Shantakumar, Chairman, Saatchi & Saatchi.

Calling the year gone by as a “mixed one,” Mr Shantakumar estimates that FMCG spends were upped by nearly 20 per cent compared with the previous year. It was only the past 4-5 months which were badly affected for the ad industry but then again during Diwali there was general spike in spends. It was fundamentally a mixed bag of tricks for the ad industry,” he says.

Meanwhile, in spite of ad spends hitting a low, new agencies looking for growth outside their respective markets were launched. BBH, Wieden + Kennedy (by acquiring a local Indian agency), BBDO did launch their respective agencies. These agencies felt this was the right time to enter the market in spite of recessionary trends. As Mr Subhash Kamath, Managing Partner, BBH, says, “It is good to enter the industry at a time of recession as we can be effective. We have to be patient to get business and are looking at doing select volumes in the country.” Estimating the ad industry to grow between 12 to 15 per cent over last year, Mr Kamath also feels that its telecom and traditional FMCG which have helped in sustaining the growth rates in the ad industry. “Overall, it is cell phone companies and traditional FMCG who have been the spenders, ” states Mr Kamath.

Future prospects

Expecting a bleak time ahead for the industry, the slowdown will have a trickle down effect with large clients possibly cutting down on production costs. As Mr Kamath predicts, “Clients will try and cut back in various ways. Some of the large clients might re-run their old ad films and bring down their costs of film production. They may also make ad films of shorter duration going forward.” All the same, the slowdown is unlikely to have a drastic effect on the ad industry.

Summing up Mr Aniruddha Banerjee, President & COO, Ambience Publicis, says, “I don’t think the slowdown has been that drastic for the ad industry. A lot of the growth has been due to the telecom and FMCG spends which have not tapered down during the slowdown.”

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