OOH: HURT AND RECOVERING
Uncertainty prevails in the out-of-home advertising sector as spends fluctuate, industry feels a correction is due. Rahul Dubey and Priyanka Nair analyse different projections about the industry and its growth prospects The negativity was coupled with less spends from the consumer durables segment and entry of more players into the business. This raises a question whether 2012 is going to be an uncertain year for the medium. Noomi Mehta, Chairman and Managing Director of Selvel One Group and Chairman, Indian Outdoor Advertising Association (IOAA) agrees. “Growth rate could be dangerous this year, but we are hoping to re-establish 7% share of the outdoor industry in the overall advertising pie,” he says, adding that the revenue of his company is down by 10% and it is by and large true for the rest of the industry. Apart from airport terminals of metro cities and a few other transit points in the country, business in most of the areas has slowed down considerably. However, if all other factors such as airport terminals, railways and non-transit media sales of smaller towns are taken into account, overall sale volume has significantly grown over the last year. Sale figures and overall outdoor advertising have increased in the last two years, however, they have not translated into numbers when it comes to revenue generation. “The industry is doing badly, but that does not mean there is no growth of sales. It is like the television industry. There have been more sales in the entire sector, but at the same time, more players have joined the bandwagon,” says Mehta. In this context of negative growth and uncertainty, one of the most promising sectors for advertisers has been Media & Entertainment, which has significantly increased spends on outdoor ads along with several innovative ideas for the medium in the last one year. As this sector grew by over 11%, its ad spends on different media platforms including outdoor, also shot up. The growth story and its contribution to outdoor was evident from a row of attractive 2D and 3D advertising in metro cities during the Cricket World Cup, Season 4 of the Indian Premier League (IPL) and Commonwealth Games. According to industry experts, the Media & Entertainment industry will continue to advertise heavily in the outdoor medium and there are reasons to believe in this hypothesis. As per a PriceWaterhouse Cooper report on Media & Entertainment Sector, 2011, consumption of traditional and modern media will only accelerate growth of the sector. This is expected to increase traditional modes of advertising; outdoor being one of the receivers. “Presence of Media & Entertainment properties on outdoor medium is very strong now. More the number of TV channels, greater is the need to advertise. The best way for films and media companies is to advertise on outdoor platforms because it addresses three major issues - localization, reach and language-specific target groups,” elaborates Mehta. 2012 – YEAR OF RECOVERY? SMALL TOWNS TO FUEL GROWTH DIGITAL OOH - THE WAY AHEAD CHALLENGES AHEAD
While traditional OOH has a factor of uncertainty hovering around it, there are a few specialized segments that look bright on the chart.
Shopper marketing is in. With the advent of shopper marketing, the prevailing go-to-market strategy has entered its next stage of evolution. Saatchi & Saatchi X, Publicis group's globally dedicated shopper marketing agency, was one of the early players who set up base in India in 2010. Not much buzz was heard in the space for the next one year. With the retail sector mushrooming in the country, global agencies are strategizing to set up their specialized division for shopper marketing in India. TBWA formally announced early last month the launch of its promotional, retail and shopper marketing agency, Integer, in India. Just 20 days later, DDB Mudra Group announced the entry of TracyLocke, one of the leading shopper marketing agencies into India. Bob Jeffrey, Chairman & CEO, JWT Worldwide also recently mentioned that the agency would like to bring its shopper marketing cell to India very soon. The scale on which the agencies are setting up their shopper marketing divisions, one can safely say that the future of this sector is bright. One of the reasons why this form of OOH advertising will be an attraction is because of a clear measurability tool. Talking about this, Jim Sexton, Global Chief Marketing Officer, TracyLocke, says, “In today’s digitally-fuelled, fragmented, ever-evolving marketplace, brands must reframe how they reach their target audience and drive revenue. It’s about meaningful engagement that produces measurable results. If you didn’t measure, it didn’t happen.”
While shopper marketing is a relatively new concept in India, industry experts believe it will soon become the dominant concept for in-store selling. Many manufacturers believe they are catching up because they have initiated shopper marketing programmes. For instance, Future Group, one of the largest retail networks in India, has offered its retail space for advertising across 40 Indian cities to cash in on 200 million consumers every year. The size of the business for the group has gone up to Rs 100 crore from this venture.
Also, opening up FDI in Indian retail will let foreign retailers own up to 51% of supermarkets and 100% of single-brand stores. This would create avenues for tremendous brand awareness and promotion in this space, taking OOH advertising to a greater scale and more sophistication. The industry looks at the largely unutilized space of the sector as an opportunity to penetrate and flourish.
Currently, the Tier 1 towns with metros account for more than half of the total OOH market, but this is expected to change going forward. The market will penetrate the Tier 2 space. Also, with local authorities and municipal corporations beginning to frame guidelines to regulate the sector, OOH is expected to get more organized over a period of time.
While urban markets will still lead spends, Tier2 and Tier3 cities will also drive higher revenues commensurate with consumption very soon. OOH still being a city-centric and local medium, with increased infrastructure development activities in these towns, many industry players will focus more on these towns. Another reason why OOH is expected to grow at a faster rate in these smaller cities and towns is the cost effectiveness factor. Local governments have started investing considerably in infrastructure projects and seeking private participation, and municipal bodies have also discovered value in making OOH companies invest in basic infrastructure development in lieu of media rights to those properties. For example, the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) Limited has recently invited requests from leading companies for development of modern foot overbridges, sky-walks and bus shelters in Industrial Area Local Authority centres in certain areas of Hyderabad on PPP (public-private partnership) mode in lieu of advertisement and commercial rights. Successful bidders will be allowed to display advertisements on the exterior and interior space of the FOBs and bus shelters. The scenario in the metros is different as regulators are still not the enablers of our industry. Changes are made in bits and pieces, but there has to be a unified code of conduct. There has to be a standard regulation across the country. Commenting in this context, Cherian Peter, Chief sales and marketing officer, Muthoot Group believes, “OOH is still a cluttered space. What the industry needs to work on is to generate clutter-free ideas and think of unconventional avenues for clients.”
Food malls and restaurants dotting the National Highways of Maharashtra are new strategic locations that are targeted as they are cheap and serve an effective point of sales for many FMCG brands. Earlier, the advertisers were successful in gaining people’s attention on highways through hoardings and other traditional forms of advertising like signages, kiosks and samples. However, with increased competition for top of mind recall, capturing the audience’s attention and retaining their interest have been the main challenges for advertisers. Digital OOH is slowly gaining momentum in these areas and has shown effective results too for a few brand categories.
According to Veerendra Jamdade, Founder-Director and CEO of Vritti Solutions Ltd, “In 2012, not just big brands like HUL, even SME and niche area marketers and advertisers will look beyond metros, that is, small towns for all product launches and promotions as the metros are getting saturated. This will happen for all lifestyle, cosmetic products and electronic gadgets. Marketers will look for interesting activations at transit hubs around places of congregation. Highway food malls and other transit places on the highways will be the focus for the automotive sector, food and beverages, builders, tours and travels and other lifestyle product companies. Technology will play a vital role in OOH for monitoring and control.”
Automobile brands also see a huge potential in rural markets, where aspirations are high and the desire to own a personal vehicle is growing. Positive factors like low penetration levels and less dependence on loans have resulted in major automotive brands increasing their focus on these markets to increase sales. In such a scenario, local auto dealers play a vital role in creating a robust presence for their umbrella brands in potential markets.
Traditionally, digital signage in India started off by being nothing but a dynamic replacement of static billboards. Even though the sector has been around in India for more than six years now, its market size is nowhere near those of the US or China. Indian digital signage players do not typically disclose their billings, but analyst estimates see India's digital signage industry size somewhere between 1/8thand 1/10thof what it is in China today, and about 1/100th of what it is in the USA today. According to industry experts, it accounts for hardly 2-5% of the total OOH pie.
Hemanth Shah, President, Lintas Initiatives thinks we will soon see the spread of digital OOH units. “They are already prominent at the transit hubs but would continue to expand into traditional spaces as well. I also see adoption of technology-led solutions picking up pace. We believe brands would always value connect with the right TG and not the media unit. Hence, as an agency, we propagate ideas that are media-agnostic and this year we can hear that resonate clear as a bell.”
The industry believes that airport advertising in India will get far more sophisticated and at par with the international airport spaces. It will be more digitized, which not only gives qualitative response to the brand, but also provides lots of engagement and is far more measurable and tuned in to the communication that brands do. The rapid growth in the airport retail business in India, triggered primarily by increase in passenger traffic and innovations in advertising, has brought about a robust revenue stream for the OOH players. According to a boutique retail consultancy, the airport retail business in India topped $1 billion in revenues during 2011, on the back of increased airport traffic and more people shopping on the go.
Industry leaders believe that survival of the fittest will define the year for the outdoor industry. On the profit front, competitive advertising in telecom and FMCG sectors in the first two quarters are expected to stabilize the medium. While expectations from telecom and real estate sectors are high this year, many believe that this year will only be a year of recovering the dues and balancing the losses incurred. What could prove to be a game changer are innovations and non-traditional approaches to the medium. The next big challenge could be an increasing rush of smaller players in the domain. In Mumbai alone, there are close to 400 vendors, who are eating into the revenues of larger outdoor media companies and obstructing consolidation. “This issue is going to hurt the industry badly. New players are entering the industry every day. Apart from competition, there will be a serious lack of study on the medium which will leave the industry clueless about the direction in which we are heading,” explains Paul. The second big challenge is connected with regulatory procedures. There is a clear lack of standard operating procedure (SOP) for the medium, unlike other media platforms. The SOP is loosely defined and understood by the companies. Technically, SOP has been accepted by the industry in parts and by and large, there is a standard procedure that the companies will accept pay orders (PO) within 15 days. “This is an area where the association has been focusing. Sometimes pay orders are released in six months which leads to losses. Clients can only be convinced of regulations and challenges of the industry only if a SOP is accepted by all,” asserts Mehta. A common regulatory protocol is expected to remove many hurdles. The IOAA is also considering regulations over terms of payment from clients and application of correct rates based on a memorandum. Building outdoor sites, building business around it and sustaining it in the long run is also a more challenging task today.
With infrastructure growth, development of improved street furniture should be in focus, which will be better in terms of aesthetics and upkeep as it will be built and managed by large asset owners. Service tax change in notification last year will continue and will force both agency and asset owners to enhance their working capital outlay, but clients who don’t fulfill their part of the contract by paying in time will stretch agencies’ and media owners’ finances and further erode the margins.
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