A slow start to 2023 for the ad industry

While the year may have begun on a muted note for advertisers, the industry hopes that the IPL season infuses some momentum into the spends

by Naziya Alvi Rahman
Published - January 31, 2023
4 minutes To Read
A slow start to 2023 for the ad industry

With the festive season coming to an end and brands cutting their ad budgets, it’s not exactly the perfect beginning to a new year that media agencies had hoped for. Going by the industry veterans, there is a drop of up to 10-12% in the business in January. Experts say the real heat of a possible recession has started to show now as the festive season has officially come to an end.

“Factors like war, recession and drying up of funds have been on for quite some time but thanks to the festive season and, prior to that, events like T-20 World Cup and IPL we did not feel the heat so much. But now some brands have just completely withheld their spends and things look quite bleak for us in this quarter,” said a senior agency executive.

Most believe the tough times are going to last till the end of the first quarter. “We are pinning some hopes on IPL to bring back momentum into the spends but overall, even the event may get impacted due to the slowdown,” said another media planner.

January 2023, when compared to the same month last year, has been significantly down. “Post Covid outbreak, January 2022 showed significant growth. That was the time all agencies made big predictions for the ad industry. No one had thought of a possible war hitting the world soon leading to an increase in raw material prices. Also, China is still struggling with Covid led pandemic which further has increased the cost of raw materials. All these factors have led to cautious behaviour forcing the industry to cut on ad budgets,” said another senior executive.

Experts believe both the FMCG and consumer durable sector is likely to get affected if the situation in China continues to worsen. “The companies are watching how the situation pans out in China once their festival season is over in early February. If the rise in infections persists leading to another lockdown or shutdown of factories, it is likely to impact raw material cost required for making televisions, smartphones, and summer appliances such as air conditioners and refrigerators in the April-June quarter,” shared another expert.

More trouble for agencies with start-up clients

The drop is believed to be almost to the tune of 18-20%, for agencies that handle start-up clients. They have believed to cut their ad budgets almost to nil. “They were one of the bigger spenders until last year. Now that they are struggling to show a decent top line, they are cutting significantly on advertising budgets.”  

As per a report by PricewaterhouseCoopers (PwC) there is a 52% decline in funding in CY22. 

“There is a market pullback by VC funds that are picky about their investments. Hence there is a drop in ad budgets,” said a marketer.
 
Recession fears

Recession fears have had a significant impact on the Indian media industry. “As companies and businesses face financial difficulties, they have reduced their advertising budgets, which is a major source of revenue for media companies. This has resulted in a decrease in overall ad spend on traditional media such as television, print and radio, as well as a shift towards more cost-effective forms of advertising, such as digital media,” shared a media planner.

Experts feared that in addition to the reduction in ad revenue, the recession may also lead to a decrease in consumer spending on media products and services, further exacerbating the financial challenges faced by the industry

“This is a challenging year for us ahead. Indian media companies may have to adapt to the new economic reality by finding ways to reduce costs, diversifying their revenue streams, and focusing on digital platforms. They may also have to be more creative and innovative in order to attract and retain customers,” added another media expert.

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