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
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
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
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
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.