Marketers have witnessed a swift transition from traditional advertising to digital advertising, including social media, paid search ads, display ads, online videos, etc.
The low data costs, the growing penetration of smartphones, and the rise of millennials and Gen Z drive this transition.
Obviously, this also makes business sense for brands as digital ads are seen as cheaper than traditional TV commercials and print ads. These ads’ lifespan is also optimized as the ads stay on the internet as long as the campaign lasts, and even after. However, the most interesting part of a digital ad is that the audience can be targeted more precisely based on their behavior, demography, likes, interests, etc. So, the ads are not intrusive and are almost personalized for the target audience.
No wonder digital has become the second-largest advertising medium in the country. It has even outpaced the traditional advertising media such as TV, radio, and outdoor advertising with a growth of 10.7%. According to Dentsu Aegis Network (DAN), the digital advertising industry will grow at a CAGR of 31.96% by 2021. It will contribute 29% to the ad market size by next year. When we study the market format-wise, DAN states that social media was the leading digital advertising format with the highest ad spends. Over 28% of the digital advertising budget was spent here. In a close second, was paid search ads with 25% of ad spend. The promise of an immediate stream of relevant search traffic is the primary reason for the growth.
With the growing popularity of digital advertising and a promise of more innovations in the future, let’s look at how the top three sectors in India have embraced it.
3 Sectors In India Embracing Digital Advertising
Considering that the FMCG sector had dominated the traditional advertising media such as print, TV commercials, and OOH for a long time, it shouldn’t be a surprise (or perhaps it should) that this sector would be the highest spender of digital advertising. In separate studies conducted by DAN and Kantar, FMCG was identified as the top spender on digital advertising. Way back in 2016, FMCG companies spent only 10% on digital advertising. But according to DAN’s recent report, the FMCG sector contributed 22% to the digital advertising industry. It spent 36% of its digital advertising budget on videos, followed by social media and display ads. So, what led to this sudden shift from traditional advertising to digital advertising?
Here’s what Vikas Agnihotri, Industry Director of Google India, had to say:
“Mass Brands need mass reach, and Online video today has the critical mass required for brands to drive business impact. Digital today is mainstream, and we are seeing successful CPG companies investing behind not just media but insights and analytics to decode changing user journeys across categories.”
The case for digital ad spending has strengthened further during COVID-19. Consumer behavior has changed, and brands have cut down their advertising costs due to demand-supply gaps. Ad rate trends are volatile, but brands find digital advertising to be more cost-effective. For example, if a print ad costs anywhere between 5 lakhs to 70 lakhs, and television ads cost 4 lakhs to 7 lakhs for 30-seconds, a PPC ad and SEO ad costs just up to 25,000 per month.
Although e-commerce spends 40% of its ad budget on television, the advertising budget for digital ads has increased by 4%. According to DAN’s report, the sector has spent over 19% on digital advertising. E-commerce companies spend 44% of their digital media budget on paid ads, followed by 25% on social media. Their advertising expenditure on print media has decreased from 25% in 2018 to 16% in 2019. Although e-commerce did better than other industries during COVID-19 due to the lockdown and shutting down of brick and mortar shops, it is left to see how they spend on digital advertising in the future. As per a recent report, e-tailers were cautious about spending money on festive ads despite festivities in the air.
- Consumer durables
The consumer durable industry is the third sector to have embraced digital advertising. DAN’s research showed that the industry spent 11% of its marketing budget on digital advertising. They spent 30% of their digital media budget on paid search, followed by social media. A recent report stated that the marketers of top consumer durable companies were willing to spend and focus more on digital and social media advertising during the festive season. The aim was to compensate for the industry’s losses in the first half of the year due to COVID-19. Here’s what Shirish Agarwal, Panasonic India’s head of marketing and brand, had to say about digital advertising taking precedence:
“Marketing mix for consumer durables firms will change with digital taking the lead as it has become the most important touchpoint for the category. Social media, influencer marketing, content marketing, which drives usage of products, will be our focus.”
Apart from these three sectors, BFSI, telecom, and the automotive industry were some of the largest spenders on digital advertising.
Digital advertising is here to stay. While marketers have some enduring concerns about the medium, the pandemic has led to a change in how consumers shop and behave. Consumers are engaging with brands online actively. This could have a massive impact on digital advertising, as there will be more innovations in technology and personalization. In fact, industry experts say that programmatic advertising will be the future of digital advertising. Given how Indian consumers are going mobile-first and consuming more digital videos and mobile ads, programmatic advertising seems to be gaining popularity. According to a 2018 study by Boston Consulting Group, Programmatic Guaranteed spend will increase up to 17% by this year-end. Brands have also started taking a keen interest in programmatic strategies due to increased transparency and control in bidding, better audience reach, real-time reporting of ad performance, and a chance of reaching 98% of the ideal customer with an increased probability of conversions. Of course, brands must remember to choose the right partner and tool to implement programmatic advertising.