Mar, 2019      |     By Anil Kumar, Ujjwal Chaudhry, and Abhyudaya Ranglani

Evolving Landscape for the $3Bn Digital Ad Industry

Digital advertising is likely to be a ~$7 Bn opportunity By 2021


Anil Kumar

Anil Kumar

CEO

Ujjwal Chaudhry

Ujjwal Chaudhry

Associate Director

Abhyudaya Ranglani

Abhyudaya Ranglani

Associate Consultant

Evolution of digital media and content platforms

The Indian digital content story has evolved through three stages:

New age digital platforms have scaled must faster in India

Evolution of Digital Media in India

Digital ad spend growing 3X faster than overall ad spend

Advertising has evolved in the last few years as peoples' content consumption preferences has changed. It has evolved from print to television (starting from 1990s) to digital platforms (from 2008 onwards). Advertising has typically lagged the user interest by a few years as advertisers wait for the medium to reach a critical mass before using it for advertising.

Over $14 Bn were spent on advertising in 2018, which is growing with ~10% CAGR. Digital advertising, which was 12-15% of overall ad spend in 2015 is growing at 3 X pace (~30%) accounting for 20-25% in 2018. Digital ad spend is expected to account for 32-35% of overall ad spend by 2021, which will create an additional ~$3.3 Bn spend on digital. There are multiple drivers of growth for the digital ad industry:

Growth Drivers

• Ever-growing engaged user-base
• Ability to target specific segments
• Low entry barrier for advertisers compared to TV

Digital advertising is likely to be a ~$7 Bn opportunity By 2021

Figure 1.1 Overall advertising spends in india

Figure 1.2 % of advertising budgets earmarked for digital ad spends

The content consumption patterns have been changing fast in digital media. Since majority of the content earlier was created in western world and the dominant social media platforms were English-focused, the audience was English first.

In CY18, India has ~300 Mn Social media and content users which is expected to reach ~500 Mn by CY22. Majority of the next 200 Mn users will come from tier 2+ cities 2+ cities who prefer to consume content in vernacular languages.

Advertisers have also seen this shift, and agree that until 3 years ago, reach of digital media was limited to English speaking population but that is no longer the case. Increasingly, they are able to target tier-2+ consumers using digital media.

Vernacular is likely to be a ~$1.4 Bn opportunity by 2021, growing at a CAGR of over 70%

Figure 2.1a Digital media reached only English speaking populations 3 years ago

Figure 2.1b Digital media reaches Tier-2+ populations today

Figure 2.2 Vernacular digital ad spends in India

Industry Scan

  • Digital was defined mostly as social media as a few years ago, so the reach was definitely limited

  • Smartphone penetration and Internet access have allowed us to reach audiences in Tier 3 and Tier 4 cities

  • Vernacular advertising is beginning to gain a lot of traction and attention – we will have a dedicated vernacular budget in the future

Facebook and Google dominate today, but the landscape is changing fast

Facebook and Google today contribute to 80% of overall ad spend. Till a few years ago, Facebook and Google were the only platforms with a significant reach, and hence were to command a large share of the pie.

While advertisers feel that they are able to successfully target Metro-audience using these channels, they are unable to reach tier-2+ audience well using these platforms. While there is a good amount of reach for Facebook and Google, the RoI and conversion remain low. Advertisers are hence willing to try other platforms.

Figure 3 Advertisers feel that digital delivers sub-optimal performance on Vernacular, but are open to trying out new platforms

Majority of these platforms have seen limited success in terms of reach and remain in <5 Mn$ revenue category.​

Vernacular-based content aggregators will take up the largest share of pie

Content and news aggregator platforms constitute the most viable alternatives to the Duopoly of Facebook and Google

Figure 4 Split of digital spends

Reach, Content Quality and Monetizability of audience will determine the winner

Key Trends: Advertisers consider four criteria as the most important for selecting a platform which affects their RoI

Based on RedSeer analysis of content aggregator platforms, there are only 2 platforms which meet all the criteria – Hotstar and Dailyhunt. These platforms are expected to gain from their large reach, high quality content and highly monetizable audience

Dailyhunt and Hotstar have been able to create high reach, high quality content and highly monetizable audience

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