FY2024 is likely to be a muted year for advertising spend with a 6% growth and is expected to touch $16-17 billion in FY2024, owing to a slowdown in consumption observed in the last 5-6 quarters as well as a dip in PE/VC investments because of rising interest rates and geopolitical tensions, a report released by Redseer Strategy Consultants has noted.

MSMEs account for 1/3rd of digital ad spending in India, thanks to growing digital savviness of MSMEs and self-serve advertising solutions that have proven to be the primary driver, the report said.

The advertising sector is also recovering from the impact of 28% GST levy on the Real Money Gaming format, the report said. Growth in advertising spending reduced for most sectors in FY24, with eCommerce being the only exception, it noted.

Despite macroeconomic headwinds leading to most consumer sectors controlling their ad spending, eCommerce platforms will continue to spend in FY2024, estimated at 15% growth in spending compared to this fiscal.

As per the report, digital Advertising is well on its way towards amassing a significant user base of 800 million internet users, which will fast surpass Television viewership in 1-2 years. This demographic is spending almost 1/3rd of their waking hours on internet, the Redseer report said. 

Five key trends for the next 2 years mentioned in the report are:

1. The rapid growth of Influencer Advertising owing to the cost-efficiency of the format
2. An increase in advertising expenditure towards Tier-2+ audiences
3. The faster growth of Performance Ads supported by Analytics tools
4. Maturing Programmatic Play led by a focus on contextual advertising
5. The integration of GenAI across the advertising value chain

Mukesh Kumar, Associate Partner at Redseer, observes: “As digital natives shape consumption patterns across the nation, brands have a never-before opportunity to address a much-larger and diverse consumer pool through advertising. The rise of challenger platforms has defined the growth in digital advertising in FY2024 and expected to remain so in next years or so. It will be fascinating to witness cutting-edge creative strategies take shape across platforms especially with the possibilities that programmatic advertising and GenAI can offer for the sector.”

The report notes that advertisers are increasingly spending on Challenger platforms like Retail media and content platforms with niche offerings owing to multiple factors like specific targeting of high intent users, greater reach within Tier-2 audiences and increased attention span on the platforms.

Of all the platforms, hyperlocal platforms, which have already exhibited a 70% increase in Ad Revenue CAGR between FY21-23 and Short Form Video platforms (which have exhibited a 50% Ad Revenue CAGR increase) are the fastest growing. eTailing and OTT are two other hypergrowth sectors for advertisers to watch out for.

The report also reveals that Challenger Platforms compare differently across various parameters of the marketing funnel. For instance, brands might see higher rates of Retention and Conversion on eTailing and Hyperlocal platforms whereas Awareness might not be on par. OTT Video, Audio and SFV on the other hand performed well in the Awareness and Consideration parameter but were less favorable in terms of Conversion and Retention.

CPG and Retail, eCommerce, Gaming, Media & Entertainment and Consumer Durables are the top 5 Consumer sectors for Digital Ad Spending in FY2023. Retail-led sectors consisting of CPG and Retail, eCommerce, Consumer Durables and Electronics as well as Automobile categories accounted for 60% of the digital ad spend. Content and Service Sectors accounted for 27% of the advertorial spend in the USD 8.2 – 8.7 Bn market.

FY2024 is set to witness digital disruption within the consumer sector with greater spends from digital-first brands and legacy brands making the digital pivot. According to the report, eCommerce, Travel & Hospitality and Consumer Durables sectors are expected to increase their ad spends in FY24 with customer retention in view. Digital advertising is projected to grow at 11-12% for the next 4 years to become worth $14 Bn in FY2028.