FY24 ad spends to see muted growth by retail and media tech: Redseer Strategy Consultants

• Redseer's report analyses India's digital ad landscape, predicting a modest 6% growth

• Despite economic challenges, e-Commerce platforms sustain ad spends, showing resilience

• Challenger platforms and retail media gain traction in digital advertising, emphasising video content

• Five trends emerge: influencer marketing, tier-2+ audience focus, performance ads, programmatic advertising, and genAI integration

Redseer Strategy Consultants, a strategy advisory organisation, recently released its report titled Breaking Barriers: Rise of Challenger Platforms in the digital ad landscape on February 29, 2024.

The report outlines how digital advertising platforms are evolving and addressing the maturing demand of advertisers and puts forth five key trends that are expected to take shape over the next two years.

The company’s research reveals that FY24 is likely to be a muted year for advertising spend with a 6% growth and is expected to touch $16-17 billion in FY24. Additionally, the advertising sector is recovering from the impact of the 28% GST levy on the real money gaming format.

The report also notes that despite macroeconomic headwinds leading to most consumer sectors controlling their ad spends, e-Commerce platforms continue to spend in FY24, estimated 15%  growth in spending this fiscal.

The emergence of digital-first brands, programmatic advertising as well as the evolving offerings of digital ad platforms is shaping the course of advertising. 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.

The report highlights a growing trend where advertisers are allocating more funds to challenger platforms such as digital and retail media, and niche content platforms. This shift is attributed to factors like precise targeting of high-intent users, broader outreach to Tier-2 audiences, and longer attention spans on these platforms.

Mukesh Kumar, associate partner, Redseer Strategy Consultants, says, “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 FY24 and is expected to remain so in the 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.”

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 short-form video (SFV) on the other hand, performed well in the awareness and consideration parameter but were less favourable in terms of conversion and retention.

In FY23, retail-led sectors consisting of the consumer packaged goods (CPG) and retail, e-Commerce, consumer durables, and electronics as well as automobile categories accounted for 60% of the digital ad spends. Content and service sectors accounted for 27% of the advertorial spend in the $8.2-8.7 billion market.

As per the report, FY24 will be witnessing digital disruption within the consumer sector with greater spending from digital-first brands, and legacy brands making the digital pivot. E-commerce, travel and hospitality, and consumer durables sectors are expected to increase their ad spends in FY24 with customer retention in view.

afaqs! asked Kumar about the kinds of brands currently advertising on e-commerce platforms and their growth prospects. To this, he says, “There are two sets of platforms within e-Commerce, the first one being hyper-local like Swiggy, Zomato, Blinkit, and Zepto and the other one is e-tailing, which is Amazon, Flipkart, Nykaa, and Myntra. Within the hyper-local platforms, the advertising is done by restaurant chains, FMCG, D2C, beauty and personal care, and electronic brands. On the other hand, Amazon and Flipkart have electronics, FMCG, and fashion are the top categories that advertise. D2C brands are also the fast-growing spender there."

The rebound in consumption and growth across sectors will be shaped by the rise in urban demand and the gradual recovery in rural demand spread across the next 12-18 months, catalysing advertorial spending at a CAGR of 9-10% over the next four years to become $23-24 billion in FY28. Digital advertising would continue to outgrow the market growth at a CAGR of 11-12% and account for 60% of overall advertising market in FY28.

As per Kumar, the digital advertising sector looks to chart its way forward with five key trends that are expected to take shape in the next two years:

1. The rapid growth of influencer advertising owing to the cost-efficiency of the format

Influencers and new internet celebrities are increasingly becoming a cost-effective medium of executing a campaign and as advertisers are optimising and trying to get more value out of their ad dollars spent, there is a high propensity to adopt and leverage influencers in digital advertising.

2. Increase in advertising expenditure towards Tier-2+ audiences

Brands will continue to increase their focus and will leverage advertising platforms that are focussing on tier-2+ users. These are niche platforms like Indian advertising platforms, OTT, news, and short-form video platforms catering to regional audiences.

3. The faster growth of performance ads supported by analytics tools

Kumar expects the next 24 months to be more focussed on performance ads. While branding ads will continue to be higher, the growth will come from performance ads as brands are increasingly looking to become very specific in their targeting and in terms of outcome.

4. Maturing programmatic play led by a focus on contextual advertising

Programmatic advertising in India is still not very well adopted outside of Alphabet Inc. and Meta’s ecosystem. With precise targeting and highly efficient execution of ad campaigns, the programmatic play will continue to grow and see adoption outside of Meta and Alphabet's wall carton.

5. The integration of genAI across the advertising value chain

Right from campaign planning to execution, and monitoring performance, advertisers could see genAI being adopted in a big way.