Mumbai: A report released by Redseer outlines the landscape of digital advertising in India and the emerging developments within the ecosystem as the digital-first approach takes shape:
1. Overall ad spending in India is estimated at $16-17 Bn in FY2024, growing at ~6% in the fiscal. Digital Advertising which accounts for ~55% of total spend is set to grow at 6-7% in FY2024.
2. Muted growth in ad spend in FY24 is impacted by the slowdown in consumption over past 5-6 quarters, a dip in PE/VC funding and the levy of 28% GST on the Real Money Gaming format
3. Most consumer sectors have optimised their ad spending and the eCommerce sector is the only one to see ad spending increase by 15% in FY24
4. Despite slowdown in ad spending, Advertisers increased their ad spending on Challenger Platforms like retail media (ecommerce, quick-commerce etc.), and content platforms (OTT Audio, SFV, etc) owing to high conversion potential and wider reach among Tier-2 audiences respectively
5. With consumption to rebound in the next 4-5 years, advertising spend is projected to grow at 9-10% CAGR over the course of the four years, with digital advertising growing at 11-12% in the same period.
As the sector looks to chart its way forward, five key trends are expected to take shape in the next two years:
1. The rapid growth of Influencer Advertising owing to the cost-efficiency of the format
2. An Increase in advertising expenditure towards Tier-2+ audiences
3. The faster growth of Performance Ads supported by Analytics tools
4. Maturing Programmatic Play led by focus on contextual advertising
5. The integration of GenAI across the advertising value chain
The Report also notes that despite macroeconomic headwinds leading to most consumer sectors controlling their ad spending, eCommerce platforms continue to spend in FY2024, estimated at 15% growth in spending this fiscal. The emergence of digital-first brands, programmatic advertising as well as the evolving offerings of digital ad platforms is shaping the course of Advertising as we know it. Digital Advertising is well on its way towards amassing a significant user base of 800 million internet users which will fast surpass Television viewership in 1-2 years. This demographic is spending almost 1/3rd of their waking hours on internet.
Retail Media and Challenger platforms are fast growing in digital advertising, and content formats are shifting more towards video and interactive:
The digital ad market in FY2024 is expected to remain muted at a 6-7% growth rate and reach US$ 8.8 – 9.3 billion in the fiscal, with global platforms such as Alphabet and Meta set to moderate their market
share from 62% in FY2023 to 60% in FY2024. Retail Media platforms like eTailing and Hyperlocal, on the other hand, is expected to grow at 20% in FY2024 and increase its market share from 18% in FY2023 to 20%. Content-based platforms are set to continue retaining their 20% share this fiscal. The report notes that advertisers are increasingly spending on Challenger platforms like retail media and content platforms with niche offerings owing to multiple factors like specific targeting of high intent users, greater reach within Tier-2 audiences and increased attention span on the platforms.
Of all the platforms, Hyperlocal platforms, which have already exhibited a 70% increase in Ad Revenue CAGR between FY21-23 and Short Form Video platforms (which have exhibited a 50% Ad Revenue CAGR increase) are the fastest growing. eTailing and OTT are two other hypergrowth sectors for advertisers to watch out for.
The Report also reveals that Challenger Platforms compare differently across various parameters of the marketing funnel. For instance, brands might see higher rates of Retention and Conversion on eTailing
and Hyperlocal platforms whereas Awareness might not be on par. OTT Video, Audio and SFV on the other hand performed well in the Awareness and Consideration parameter but were less favorable in terms of Conversion and Retention. CPG & Retail, eCommerce, Gaming, Media & Entertainment and Consumer Durables are the top 5 Consumer sectors for Digital Ad Spending: In FY2023, Retail-led sectors consisting of the CPG and Retail, eCommerce, Consumer Durables and Electronics as well as Automobile categories accounted for 60% of the digital ad spend. Content and Service Sectors accounted for 27% of the advertorial spend in the $ 8.2 – 8.7 billion market. FY2024 is set to witness digital disruption within the consumer sector with greater spends from digital first brands, and legacy brands making the digital pivot. According to the report, eCommerce, Travel and Hospitality and Consumer Durables sectors are expected to increase their ad spends in FY24 with customer retention in view.
Digital advertising is projected to grow at 11-12% for next 4 years to become US$~14 Bn in FY2028.
The rebound in consumption and growth across sectors will be shaped by the rise in urban demand and the gradual recovery in rural demand spread across the next 12-18 months, catalyzing advertorial spending at a CAGR of 9-10% over the next 4 years to become US$ 23-24 Bn in FY2028. Digital advertising would continue to outgrow the market growth at a CAGR of 11-12% and account for 60% of overall advertising market in FY2028.
Mukesh Kumar, Associate Partner at Redseer observes “As digital natives shape consumption patterns across the nation, brands have a never-before opportunity to address a much-larger and diverse consumer pool through advertising. The rise of challenger platforms has defined the growth in digital advertising in FY2024 and expected to remain so in next years or so. It will be fascinating to witness cutting-edge creative strategies take shape across platforms especially with the possibilities that programmatic advertising and GenAI can offer for the sector.”
