Mumbai: Asure barometer of a dipping economy is gaping spaces on prime billboard sites and slumping ad spends in the outdoor medium. In 2002, crumbling economic indices sparked by a tech meltdown saw street furniture—as some outdoor media vehicles are called—bereft of high-profile brand loungers.
Rocky 2008 is replaying that tableaux of vacant billboards at some prime sites across metros. Some outdoor ad budgets are being slashed by 15-30%, average occupancy rates are down by about 30% and outdoor ad rates are starting to drop in tandem, say media observers.
It is a far cry from euphoric figures touted just last year at industry meets that the out-of-home (OOH) segment is expected to grow from Rs1,000 crore this year to Rs2,150 crore in 2010, growing at a 17% gallop.
Few takers: A billboard near the Bandra flyover in Mumbai. Sectors such as financial services, airlines and automobiles are expected to slash their outdoor advertising spends by 15-20%. (Photo: Abhijit Bhatlekar/Mint)
“Rising input costs such as fuel and an increase in interest rates are impacting automobile companies, financial products, petroleum products, etc. They are cutting marketing and advertising budgets. Outdoor is of course a part of it,” says Anuj Kanakia, deputy general manager at the Mudra group.
No surprises there since big outdoor spenders such as financial services firms, auto makers and airlines are the categories directly hit by inflation and economic roil.
“Outdoor advertising accounts for 8-10% of our overall ad spends,” says Kanakia. “Categories such as financial, airlines, petroleum and automobile clients could cut outdoor spends by 15-20%. Many of the airlines are also delaying launch plans, which is affecting outdoor spends. There’s a similar case with cars, with EMIs (equated monthly instalments) going up,” he adds.
The mad scramble for prime sites spots is giving way to easier availability. Kanakia says earlier no premium locations were available. Today many of them are going blank. One can now get sites on Mumbai’s once heavily booked Mahim Causeway a lot more easily, he says.
An OOH site is booked normally for a month, and a site on Mahim Causeway could cost as much as Rs10-12 lakh a month. If the slowdown continues, it could be available for Rs8 lakh, Kanakia says.
Sanjay Shah, chief executive of Navia Asia, the OOH and ambient media unit from the Starcom MediaVest Group, says that in 2002, ambient media was seen more as an “afterthought” medium. With people spending more time out of home, sectors such as telecom, banking, finance, and TV channels started investing heavily in outdoor.
“However, as was seen in 2002, any slide in the economy is also likely to have an impact on advertising spends and among all media, out-of-home spends are the first to get axed.” Shah says.
“We are already seeing a clampdown on outdoor spends,” he adds. “However, the situation this time has been aggravated by other factors. The economic slowdown combined with the monsoon season has resulted in a dip in outdoor spends.”
What is the extent of the dip? “Well, advertisers spend an average of 10% of their ad budgets on outdoor media. This should slide to 7-8% by next year,” Shah says. The top 20 cities in India are likely to feel a higher impact than the so-called tier-II cities as the cost of media is much lower there, he points out.
Shah, however, maintains that while occupancy rates are likely to be hit, rentals may not fluctuate or drop too much even in metros since new guidelines for OOH media are expected soon. In a city such as Mumbai, for instance, restrictions on billboards near heritage sites, coastal zones and open spaces will mean a lot of outdoor media spaces that came up in the past few years will be pulled down.
These guidelines are also expected to standardize billboard sizes, etc., and therefore, media owners are likely to balance their revenue through whichever sites they are left with, says Shah.
On ad rates, Yash Gala, managing director of Zenith Outdoors Pvt. Ltd, says suppliers are holding on to prices in the short term, though they are sure to be affected in a market with falling occupancy rates.
“Traditionally, the monsoon season has always meant low occupancy. But over the last few years, the industry has not seen any slump,” he points out. “The other perception is that some of the ad spends had been diverted to the Indian Premier League, but occupancy hasn’t picked up after it got over. So, the overall economy, market sentiment, and fewer public offerings, etc., are not good news,” says Gala. “The next two months are crucial and will define which way the economy turns. We’re waiting and watching at the moment and haven’t revised rates as yet,” he adds.
Media buyers such as Chandradeep Mitra, president of Mudra Max at Mudra Communications Pvt. Ltd, however, believe rates could be substantially impacted. “Unlike television, outdoor tends to be at the periphery of all clients’ media plans and the rates fluctuate continually between demand and supply,” he says. “There are some categories such as travel, and airlines that are cutting down on outdoor as a result of rise in input costs. Other categories that will do the same include real estate, retail and financial services, since they are hit by interest rates.”
“Outdoor as a medium could lose some of its bargaining power and could become 20-30% cheaper,” says Mitra, adding, “the festival season is critical which would show us a clear trend one way or the other.”
Rathnakar Rai, managing director at Primetime International Services Pvt. Ltd, says the cuts would be minimal, although real estate, financial services, insurance and auto firms are likely to cut back on outdoor spends. Telecom will however continue to advertise heavily outdoors, he says.
There’s another reason why outdoor advertising is most susceptible to cuts in an overall media plan. Rai says outdoor is easiest to axe since unlike long-term TV and print ad deals, where advertisers and agencies don’t want to antagonize media owners, in outdoor you can come in and go out with ease.
“Personally, I think that in such a scenario, tactical advertising (including outdoor) could have a great deal of benefits, but because of the nature of outdoor, it’s the easiest to cut,’’ says Rai.
In his view, the most affected will neither be the high-demand, premium sites, nor the low-demand locations that are sold dirt cheap, but mid-demand areas such as Andheri in Mumbai that could see a cutback in terms of money spent.