India is considered among the fastest growing advertising markets and the mobile segment has been consistently the fastest growing segment in the country though it still accounts for a tiny portion of the overall ad spends. According to eMarketer, it will just account for 3.3 per cent of total ad spends in 2016. This is not an insignificant sum as it represents an almost doubling over last year’s mobile ad spend estimates.
In our Mobile Ad Spend Report 2015, we projected a growth rate of 60 per cent with a total ad spend of Rs 720 crore in 2015. This year, too, we consulted leading marketers, media planners, digital and mobile agencies to understand growth of ad spends in this segment.
The 2016 Mobile Ad Spend report was launched at this year's edition of exchange4media's annual mobile advertising awards - The Maddies.
The Maddies recognise the best work done in the space of mobile marketing in the year.
According to our estimates, mobile ad spends will grow at an even higher rate of 78 per cent to reach Rs 1,280 crore in 2016. This segment is expected to keep growing in the range of 70-80 per cent into 2017 to reach around Rs 2200 crore.
Growth Drivers of Mobile Advertising
Among the biggest influencers in the growth of mobile advertising will be the introduction of 4G and increase in smartphones. India is expected to leapfrog the US to become the second largest smartphone market in the world by 2017, says Morgan Stanley.
According to the firm, India will see a 23 per cent CAGR in terms of units sold as compared to 5 per cent for China for the same period.
“What we have generally seen the world over is that when a third of all phones become smartphones, mobile advertising gets a huge boost. In India, about 18-20 per cent of all phones are smartphones, so that inflexion point is still 18-24 months away. Consumption of video on mobile will be huge in the future and that is when sectors like FMCG and others will start spending big money on mobile advertising because that is when it will becomes more mass market,” said Ashish Bhasin, Chairman & CEO South Asia Dentsu Aegis Network and Chairman of Posterscope and MKTG Asia Pacific.
Nadeesh Ramachandran, VP (Sales) at Vserv, points out that some of the other drivers for the amazing growth seen in mobile ad spends are a push by the government towards digitization, a transformation being seen in the way India Inc. consumes content and focus on smart data led marketing.
“The biggest driver for growth of mobile ad expenditure in 2016 is consumers themselves. Indian smartphone users, on an average, spend 169 minutes per day on their smartphones, with this user base growing at a 26 per cent CAGR from 2013 to 2017. Today, most of the media interactions and touchpoints are on mobile, which generate consumers’ interest and intent signals,” said Ramachandran.
“Mobile advertising is growing at a rate that will surpass all forms of advertising in 3-5 years. TV will be disrupted first and we’re already seeing marketing budgets shifting from TV to mobile. In the coming years, it will be the de facto mode of purchases and I expect significant improvements in marketing budgets,” added Arun Pattabhiraman, VP & Global Head of Marketing at InMobi.
The Promise of 4G
4G and, especially, the launch of Reliance Jio is expected to lead to a sea change in the Indian telecom landscape with the widely held belief that data costs will decrease while bandwidth increases, which will directly lead to increase in consumption of content on the mobile.
However, there also seems to be a hint of caution in the ecosystem about 4G, given that 3G did not quite live up to its expectations and telecom infrastructure in India still leaves a lot to be desired.
“The 4G experience will be great if telcos can develop the infrastructure. Mobile advertising will be fuelled a lot more by a combination of 4G and video. Video consumption will go up in a huge way but unless the infrastructure is improved it does not make sense. There are opportunities but these are subjective to infrastructure problems getting solved,” opined Charulata Ravikumar, CEO of Razorfish India.
On the marketer side, Manan Mehta, VP (Marketing) Yash Raj Films also said that infrastructure is still a challenge. “We will have to wait and see how 4G will change the game. More bandwidth will increase content consumption and bring in new concepts like IoT, augmented reality, etc. A lot of things will change if 4G becomes mainstream. There will be a lot more experiments and trials,” said Mehta.
Despite the wariness, there is still optimism.
“The coming of 4G and the penetration of smartphones will provide easy access to internet to people. If you see, FM radio grew because radio was available everywhere, especially when people were travelling. It is the same scenario with mobile,” said Dinesh Vyas, Associate Vice President (Planning) at OMD.
According to Vinod Thadani, Chief Digital Officer, Mindshare South Asia, “With more content providers like Voot, Hotstar, etc. entering the picture, videos have become a huge real estate though earlier there was a big gap between infrastructure and content. 4G will have a huge impact. It is still nascent at the moment and might take 3-6 months for the ecosystem to stabilize across players. Looking at the growth in infrastructure, even content providers have upped their game. This is being seen not only in video content but also other OTT services like news, entertainment, etc.”
BFSI, E-commerce, FMCG and Auto Sectors Leading the Way
Media planners and digital agencies we spoke with said BFSI continued to be the most bullish in terms of mobile ad spends while spends from auto, e-commerce and FMCG were also substantial. Other major spenders included consumer durables, telecom, retail and media & entertainment.
“Mobile-first companies like taxi services, e-retailers, food delivery companies and OEMs like Samsung, Micromax and telecom companies are major spenders on mobile along with technology companies like Google and Intel. There is a lot of mobile ad spending that is happening directly which does not go through media planners. Video formats (both in-stream and out-stream) and native advertising will be the growth engines for mobile. Native is already outperforming display,” informed Vikas Gulati, MD (Asia) at Opera Mediaworks.
Also, contrary to earlier concerns, media and digital agencies we spoke with said that though there might have been some reduction in overall ad spends by the top 3 e-retailers, this is being made up by the newer entrants who focus on performance marketing.
“It’s a misconception that e-commerce companies are trimming down ad- spends. While ecommerce players are wary about traditional ad spends, they are focusing more on RoI-driven channels like mobile. In a broader scenario, with the change in FDI norms and the concept of deep discounts being hindered, e-commerce players will be looking to advertising as an important medium to drive sales. Even sellers on platforms will be looking at advertising to increase sales,” added InMobi’s Pattabhiraman.