If consumers are on a spending spree, can the advertisers looking to woo them be far behind? The latest FICCI-KPMG Media and Entertainment Industry Report notes that advertising spends in India expanded by 16.6 per cent in 2010 to touch Rs 26,600 crore, staging a strong comeback. The report also predicts that Indian advertisers will increase their adspends at a 15 per cent annual rate over the next five years. That's almost three times the pace at which global media spends are expected to grow.

Spend more

When a slowdown strikes, do companies spend more or less on advertisements? In India, the answer clearly seems to be More.

Advertising spends in India held up during the economic slowdown and soared further during the recovery. The FICCI-KPMG report notes that the Indian advertising pie grew by 12.7 per cent in the slowdown afflicted year of 2008 and held on at that level for 2009. Globally, however, advertisers took quite a different tack, slashing their ad budget by about 10 per cent between 2008 and 2009 and, then, cautiously expanding it for 2010.

The resilience in the Indian ad market may be explained by just one factor. Even during the slowdown, consumer companies faced only a brief period of uncertainty on demand. Therefore, most companies were forced to keep up advertising spends to protect their market share from marauding competitors. Evidence on this is available from a sample check of 25 leading listed consumer companies in the FMCG, durables and automobiles space. These companies managed to expand their aggregate sales by nearly 16 per cent in 2008-09, even as much of India Inc struggled to keep its topline growing. These companies also chose to ramp up their ad budget by an exceptional 23 per cent the same year, though this meant a sacrifice on profit margins. With business-as-usual in 2009-10, sales growth picked up to 18 per cent and adspends continued to grow.

Structural differences

The high growth apart, there are also other structural differences between the Indian advertising market and the global one. The print media grabs the lion's share of the advertisements in India, taking up 47.3 per cent of the market by value, according to the FICCI-KPMG report. Television closely follows with a 38.7 per cent share. Other new-age vehicles of advertising — radio, out-of-home and digital — make up a very small sliver of the ad pie in India, accounting for a combined 14 per cent in 2010. And this is likely to remain the case for some time to come. Though online and radio advertising are expected to grow at a scorching pace over the next five years, it is print and television that will continue to dominate the market, absorbing nearly 83 per cent of the overall adspend even by 2015.

Contrast this with the global market, where at $63 billion, Internet advertising was a force to reckon with in 2010, grabbing a 14 per cent share of the total ad pie. In fact, global media giant, ZenithOptimedia (an arm of Publicis), recently forecast that in the global scheme of things, the Internet would overtake newspapers as a key medium for advertisements by 2013. It also suggests that traditional media such as newspapers and magazines will see a fall in their overall advertising revenues from the current $140 billion to nearly $135 billion over the same period, ceding share mainly to the Internet and television.

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