According to a report by Redseer Strategy Consultants, digital ad spend in India to become 2.5X in next 5 years to USD 21 bn, growing at CAGR of 19-21%.
“Upon mapping market sizing across media agencies, we observe a significant under-reporting of digital ad spend in India. However, Redseer projection has considered enterprise spends, SMB spends, influencer marketing, affiliate marketing and gaming,” says Mukesh Kumar, Engagement manager, Redseer Strategy Consultants.
Notedly, Growth in UGC will empower individual creators and influencers to build their digital identity, which brands can leverage for digital ads. This strong ecosystem of ~2.5 to 3 million creators is expected to drive marketing spending of $2.8Bn- $3.5Bn by 2028, the report added.
Advertising’s Global Scenario
Economies that have strong consumer spending can splurge on advertising. For instance, the US spends 1.4% of its GDP on advertisements, of which 64% goes to digital ads, and the UK spends 1.3%. Since India is a developing nation, it spends 0.5% of its GDP, of which 53% goes to digital ads. However, with India’s PCFE expected to grow ~ 6-7% over the next 5 years, the advertising expenditure is bound to rise.
Looming Slowdown & its Effect
Global slowdown due to increasing interest rates, energy crisis etc. has led to new-age companies focusing on profitability and controlling their spending on ad and hence slower growth is expected in FY23.Under the current economic headwinds, the ad market is estimated to grow by 6% -8% in FY23. One can’t ignore the fact that of $ 15 Bn spent on advertising in FY22, 53% went into digital advertisements indicating a growth nested within the overall downturn.
We expect macroeconomic engines to pick up momentum again by FY24 since, after every economic downturn, eventually, consumer morale returns.
Digital Ads – A Necessity
With users spending ~7 hours daily on their smartphones, digital platforms have a good engagement rate. Marketers are increasingly advertising these for the precise target audiences. Some of the most popular performances driving digital advertising platforms include eCommerce, short videos, OTT, social media, long-form videos, and news outlets.
Incumbent market players like Alphabet and Meta will maintain their market share to alternate digital content platforms like OTT Video, OTT Audio, Shortform video, and eCommerce. Moreover, content and gaming platforms are emerging as the fastest-growing digital ad platforms.
SMBs Embracing Digital Ads
As digital platforms allow marketers to reach out to target groups across various categories, many Small and Midsize Businesses – SMBs have opted for digital advertising owing to its democratized access. Digital enablers such as ePayments, eDiscovery, and eCommerce have enabled traders, service providers, Kirana owners, and small shopkeepers to have an online presence.
As per Redseer, SMBs spent 30-35% of the total $ 8 Bn on digital ads in FY22 and are expected to increase their share to ~40% of the total digital ads expenditure by FY 28.
Empowerment of Individual Creators
The Indian digital economy has over 2.5-3.0 million sizeable content creators who have emerged into 4 archetypes: Micro, Macro, Mega, and Elite creators. The Micro/Macro influencers have given better ROI to bigger brands and enabled smaller D2C brands. It is projected that influencer-led live commerce in India will grow to $8 Bn by 2030, and marketing spending on influencers will grow to $ 3.5 Bn by 2028.
As the creator economy grows, it is essential to bridge the gap between brands and influencers through a centralized platform such as the creator marketplace. Such marketplace can become a single point for the brands to discover and engage with creators. The user-generated content and influencer ecosystems have the capacity to drive highly targeted advertising. Since the UGC platforms already possess content creating communities, they are better positioned for setting up the creator marketplace.
