Did digital advertising hit the slow track in H1?

Digital ad spend witnessed nearly 15 percent growth in H1, which is quite low compared to H1 of 2022 when it grew in the range of 25 percent, say industry experts

by Kanchan Srivastava
Published - August 31, 2023
5 minutes To Read
Did digital advertising hit the slow track in H1?

After an exponential rise over the past couple of years, the growth engine of digital advertising has slowed down in the first half of 2023 as startups and crypto sectors tightened their purse strings, industry experts tell e4m.

“Digital ad spend witnessed nearly 15 percent growth in H1, which is quite low compared to H1 of 2022 when it grew in the range of 25 percent,” say industry experts say.

These are the early trends for H1 2023. Scene will be clearer once Google India, Meta India, Amazon India and Flipkart, four major digital platforms for advertisements in India, will submit their annual report for FY 2023. Massive layoffs by all four giants early this year points towards a downfall, industry experts claim.

TAM Media Research statistics obtained by e4m also indicate a little slump in the digital domain between January and June 2023 compared to H1 of last year. As per TAM data, a degrowth of nearly 14 percentage points in digital ad impressions is visible in the H1 of 2023 compared to H1 of 2022 though it is still higher compared to 2021.

Although ad impressions don't indicate much about ad spends, it surely gives a glimpse of what is happening on digital platforms.

TAM’s data is based on over 81,000 Brands present in Digital Medium during Jan-Jun '23. Amazon, My11circle, Snapchat, Jiocinema App, Flipkart, Facebook and Prime Video and RBI were among the top 10 brands spending on digital.

The projected growth rate for digital ad spend for 2023 was 25%, as against 35 percent in 2022, as per the Pitch Madison Annual Report (PMAR 2023). It is noteworthy that Digital AdEx commands nearly 40 percent of India’s total AdEx. The digital AdEx is expected to end the year at Rs 43,000 crore.

Mismanaged startups to be blamed

The digital ad growth has slowed down at a time when marketers are increasingly facing pressure to justify their ad spending, reduce wastage and deliver ROI. Riding on the rise in influencer marketing, ecommerce, short videos, OTT, social media, Digital has been the fastest-growing distribution channel for brand marketers for the last couple of years.

Experts blame it on popular unicorns in edtech, crypto and gaming sectors who emerged as top advertisers over the last few years but lately they have been embroiled in allegations of financial mismanagement. Due to the crisis, they have curtailed their marketing and promotional activities drastically.

Sahil Shah, President, dentsu Creative, explains, “In the global perspective, the H1 witnessed funding winters as tech companies tightened their purse strings as money was drying up. India is still not impacted too much because India has the X factor and the country is growing.”

“The drop in digital AdEx in India is mainly due to wrongly managed startups or real money gaming firms. They have been among the top spenders over the past few years. However, sectors like auto, FMCG, finance and startups that have good business models are still spending decently,” Shah noted.

Shah adds that his own company has seen a brilliant first half on account of digital advertising.

Shradha Agarwal, Co-Founder and CEO of Grapes, echoes the sentiments. “We did see a little dip despite having the Indian Premier League in the first half. Reports at the start of this year predicted a significant growth in digital advertising expenses, but it did not turn out the way we had expected,” she said.

Some ad experts have a different observation. For instance, Amyn Ghadiali, President- Business & Integration, Gozoop Group, says that there has been steady percentage growth in H1 this year, compared to H1 2022. “The trend in digital ad spends has been notable in H1 2023 serving as a testament to the predicted 56% increase in digital ad spends for 2023,” Ghadiali noted.

Reports of ad frauds in the digital ad ecosystem have also alarmed marketers which may have impacted their decisions to invest further in digital, insiders say.

A recently released Adalytics report claimed that approximately 80% of the ads served through the “TrueView” system of YouTube, a Google owned company, had breached its own terms of service by hiding skip buttons or displaying “muted” adverts on websites and apps in automatic loop etc.

The report had shocked the advertising industry across the world with advertisers demanding refunds from YouTube for not adhering to its promises and policies.

Another report from Association of National Advertisers (ANA), also revealed recently that out of the $88 billion open web programmatic media ecosystem, over $20 billion goes to ad-waste.

Will H2 be better?

Some experts warn that H2 may be even worse as gaming brands may also curtail their ad spends following a change in their tax slab along with retrospective tax impositions. Shah voiced similar concerns.

However, Agarwal is hopeful that “small margins” can be covered up pretty quickly especially when the festive season and ICC Cricket World Cup are already knocking on our doors which will give ample opportunities to brands and marketers to grab the audiences’ attention if they can come up with unique and meaningful content pieces.

Ghadiali is of the same view as Agarwal. “H2 is looking optimistic for brands and consumers alike. There is pent up demand despite covid being a thing of the past. It feels that revenge buying is the new normal across categories. Small or Big, brands have started understanding the importance of symphony between creativity and analytics, because the time between salience and sales has reduced drastically.”