Sign on the road: ad slowdown3 min read . Updated: 22 Aug 2012, 11:37 PM IST
Sign on the road: ad slowdown
Sign on the road: ad slowdown
Mumbai: Blank billboards on the Western Express Highway to the airport in Mumbai, India’s undisputed billboard capital, reflect a slowing economy and one of its casualties, a reduction in advertising budgets.
The agencies that sell these billboards—their phone numbers now stare back at passers-by from the blank billboards, exhorting them to call—have reduced prices by up to one-third, but can still find no takers in most cases. Around half the billboards in the city’s tony Juhu area are blank. On the highway to the airport, especially between the boroughs of Andheri and Mahim, the situation is worse—nearly two of every three billboards are blank. The most expensive billboards in the city, the ones on Marine Drive, still sport ads, but they fetch around ₹ 9 lakh a week now, down from around ₹ 12 lakh.
“We are witnessing a general slowdown in the OOH (out-of-home advertising) sector this monsoon. Usually, the industry does take a temporary hit during the rainy season. However, this year, the reason is more attributable to budget conservation by restricting spends to measured and well-monitored media like broadcast, print and digital," said Lynn de Souza, chairman and chief executive officer of Lintas Media Group.
According to TAM Media Research’s AdEx data, shared by Kinetic India, outdoor advertising spends in the January-July period have fallen 10-15% over the corresponding period last year. Kinetic India is part of the WPP Group and focuses on outdoor advertising.
“In 2008-09, the slowdown was more an effect of the global economic conditions. But this time, the sentiment is low due to the Indian government’s lack of policies to stimulate demand. We need more positive measures such as a cut in interest rates on car and home loans, which in turn creates a demand for advertising," said Rajul Kulshreshtha, managing director at Kinetic India.
High inflation and slowing growth are the party spoilers. Things can look up if the government bites the bullet on fiscal corrections as that will nudge the Indian central bank to cut interest rates. Lower interest encourages consumers to borrow money from banks for buying homes and cars, and banks and other financial services providers advertise to hawk their loans. Currently, only a few of them are using billboards to attract depositors.
Indeed most billboards sporting ads have been bought by film producers, TV channels, airlines and car makers.
The agencies that sell these billboards—their phone numbers now stare back at passers-by from the blank billboards, exhorting them to call—have reduced prices by up to one-third, but can still find no takers in most cases
A few sport ads for banks and financial services companies that have traditionally dominated outdoor advertising. Real estate companies, the other category that has dominated the outdoor space, are all but absent.
If the current trend continues in September, when the busy season for outdoor advertising begins, there may be no celebration in store for billboard companies, although de Souza believes the situation isn’t as dire—not yet.
The rates are soft now, but they may go up a bit during the festive season when some of the local advertisers—retail, jewellery brands, etc.—will start spending again, she said. “It (the dip) is certainly not as sharp as it was in 2009, but the winter months will tell," she added.
An executive working with an outdoor media firm that owns billboards confirmed that business has been slow and that his company has been offering discounts, including “deals" for the festive season.
“The same rates may continue even during October-November, the peak season for advertisers," added this person, who asked not to be identified.
Advertisers drop outdoor as a medium at the first sign of a slowdown because there is no way to measure its reach and effectiveness, said Kinetic’s Kulshreshtha. The business witnessed a similar pattern during the slowdown in 2008-09, when advertisers cut spending on outdoor advertising by at least 30%, according to media buyers.
Ashish Pherwani, a partner at audit and consulting firm Ernst and Young, agreed that during an economic slowdown, advertisers prefer media with a demonstrated return on investment.
“Mediums such as print, television and radio will continue to have takers because of the robust measurement system in place. In case of the OOH sector, a lack of a universal measurement system is leading to ad spends getting diverted to other platforms," he added.
The outdoor advertising industry was at its peak in 2007, when it grew 25%.
According to a report by industry lobby Federation of Indian Chambers of Commerce and Industry and audit and consulting firm KPMG, advertisers spent around ₹ 1,775 crore on outdoor advertising in 2011, roughly 5% of the total ad spend.