WORLDWIDE ADVERTISING: Nightmare on India's ad street - Anil Thakraney, the editor of The Brief, India's only advertising magazine, charts the meltdown of an industry that has enjoyed 50% growth

A growth rate of 8 per cent in adspend, the figure at which the

Indian ad industry is popularly projected to grow this year (current

size: dollars 1,800 million), would no doubt delight the advertising and

media industry in the developed economies of the West and inspire chief

executives into throwing ecstatic parties. But back home the figure

spells "doom and gloom", as one ad agency head recently shivered.



And the reason for this sinking feeling is that the industry here for

the past decade has been pampered with double-digit growth rates - an

incredible high of 50 per cent in the early 90s. Fuelled largely by a

booming economy and massive foreign investments by the growth-hungry

western corporates, the Indian ad industry never had it so good.



The reality check would have happened last year, had it not been for the

dotcom revolution in 1999 and the better part of 2000, which saw

adspends go into a tizzy, creating a false illusion of a buoyant

economy. In 1999 alone, the market saw a spend of more thandollars 75

million by the dotties.



For the first time in at least a dozen years we are looking at a

single-digit growth rate. The most frightful development is that most of

the heavy media spenders, primarily due to the global economic slowdown,

are unlikely to spend a penny more than over the past year- and this

includes multinational and local players. In fact, the country's largest

advertiser, Hindustan Lever (Unilever India), has already announced it

will push only 30 key brands this year out of a total of 120. In the

last quarter, adspends for most categories such as consumer durables and

FMCGs were down, with dips ranging from 6 per cent to a scary 25 per

cent.



Not surprisingly, most ad agencies anticipating trouble have summarily

suspended new recruitment and are quickly cancelling training

programmes, foreign travel and other such "conspicuous" expenditures. To

say belt-tightening is underway would be an understatement; most media

houses are busy preparing war chests.



In terms of media buying itself, the figures look bad; FMCGs, the main

spenders on television, spent just 18 per cent more last year than the

1999 figure of 38 per cent. In the case of the press, the growth was

horrifying: just over 2 per cent, when the corresponding figure had

touched a high of 51 per cent in the previous period.



The slowdown has resulted in virtual bloodbath in the media

industry.



The television industry has been the worst hit, with almost all the big

names showing an embarrassing drop in growth rates. Regional niche

channels have discounted ad rates to as low as 90 per cent, just to be

able to pay salaries.



Not surprising, when you consider that there are 90 channels today

chasing a stagnant dollars 640 million ad pie. The hugely successful

Amitabh Bachchan hosted game-show, Kaun Banega Karorpati (on the lines

of Who Wants to be a Millionaire), drove the revenue of the Rupert

Murdoch-owned Star Network in India for the past year, nearly doubling

its turnover, but that too has been slipping.



This golden goose was slaughtered as all the big channels went in for a

similar format, fatiguing the attraction of easy money quicker than it

should have.



In fact, the host of a game-show programme, a popular Bollywood star,

has taken the locally promoted channel Zee TV to court for breach of

contract, as the programme was killed within a few months of being on

air.



The picture with the print medium is even worse as industry leaders

estimate that 50 per cent of the newly launched niche magazines will

wind up in the next two years for lack of ad support. In order to fight

bitter rivals dailies have, for the first time in the Indian mediascape,

started aligning with non-competitors in other markets to drive specific

sources of revenues like classified ads.



It has been a double whammy for the media. On one hand the market is not

growing, leading to revenue targets not being met, on the other the

explosion of new-media and media brands has led to huge price cuts.



A media pundit here forecasts that, in the coming year, 30 per cent of

the television channels will shut shop and 60 per cent of the websites

will log out. And into this scenario enters the WPP behemoth MindShare,

with the key objective of buying even cheaper media for its clients.



In a recent interview, Sir Martin Sorrell kept mentioning, and

triumphantly at that, that half of WPP's income comes through

advertising and that this ratio will go down to a third. Ad agency heads

in India are slowly emulating this example, most of them expanding into

other areas such as direct marketing, public relations and event

management to reduce their dependence on advertising. Ogilvy & Mather in

India, for instance, did 25 per cent of its business from non-ad-related

activities last year.



The big challenge, however, is going to be the advertisers' loss of

faith in the mass media advertising route. More and more clients,

including Lever, are looking at quantitative media where they not only

get one-on-one with their customers, but are also able to measure the

bang their reluctantly invested buck made.



Add to that the impending demise of the ad agency commission system, to

be replaced by performance-based income structures, as well as the

demand of advertisers that media be more accountable, and the circle of

fear is complete.



TOP TEN SPENDERS

Rank Advertiser dollars millions

1 Lever 142

2 ITC 43

3 Colgate 35

4 Dabur 24

5 Nestle 23

6 Videocom 22

7 McDowell 18

8 Tata Tea 15

9 Maruti Auto 14

=9 Godfrey Philips 14

10 Bajaj Auto 13

DIVISION OF SPEND BY MEDIA (% Share)

1998 1999 2000

Print 61 59 56

Television 25 28 43

Outdoor 9 9 9

Radio 2 2 2

Cinema 2 2 1

Source: A&M, year 2000.





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