Mumbai: GroupM, one of the largest media buying agencies in India, has revised its forecasts for advertising expenditure this year, citing slowing economic growth and the weakening rupee.
Ad spending is expected to now grow 8.5% in the year, lower than earlier estimates of 9.9%, the company said on Tuesday.
The forecast for advertising expenditure growth in the second half of 2013 (July to December) was revised down from 7.3% to 4.7% year-on-year.
Within that, the forecast for growth rates remained the same for categories such as digital media at 30% and outdoor media at 3.8%. However, the estimates for other media such as television was revised down from 7.6% to 5.9%, print from 4.8% to 0.7%, radio from 5.7% to 2.5% and cinema from 7.3% to 4.7%.
The forecast for overall ad expenditure in the calendar year was lowered from an earlier estimate of Rs.45,334 crore to Rs.44,755 crore. Print media will be the worst hit, with the estimate for advertising on newspapers and magazines being revised lower from Rs.18,113 crore to Rs.17,727crore.
As economic growth slows (growth was 4.4% in the June quarter, the slowest in four years) and the rupee depreciates (it has fallen 12.83% since the start of the year), companies are cutting back on advertising and promotional expenditure. Companies have put investment plans on hold as consumer spending slows.
Beyond slowing economic growth and the weakening rupee, there are some other factors at play that would contribute both to growth and a drop in ad expenditure.
Ad spending by political parties and government spending is expected to increase owing to general elections in 2014 and state elections in 2013. The auto industry is also expected to promote new launches over the next few months and the media sector itself is expected to spend money to plug new channels and programmes.
At the other end of the specturm are categories such as consumer products that have already been facing pressure from increasing input costs and raw material prices as well as manufacturing processes. Telecom, another big spender on advertising, is also expected to curb expenditure as the cost of importing smartphones and feature phones increases because of rupee depreciation.
Advertisers in the banking, financial services and insurance space are also expected to cut back spending owing to the underperforming financial markets and high interest rates.