Big tech growth pause: Brands reviewing digital media mix even as India bucks the trend

At a time when top tech companies of the world Meta, Google & YouTube and Snap are reporting a slower growth rate globally in terms of ad sales, their Indian arms have managed to buck the trend with good growth numbers. However, while the big tech companies continue to grow their ad sales in the country, the Indian online marketing industry is witnessing a churn with advertisers reviewing their digital media ad spends with a fresh outlook. 

Even as Facebook in India recorded a whopping 74% growth in gross ad revenue at Rs 16,189 crore for FY22 (ended in March) compared to the previous fiscal and Google India’s FY22 ad sales touched 24,926 crore, a 79% rise compared to the previous year, advertisers and media experts say brands have started reshuffling their media mix keeping pace with the emerging scenario. 

“The digital ad spend of the consumer packaged goods (CPG) industry on big tech companies versus ecommerce platforms has already touched 1:1. Now it is skewed towards e-commerce as it offers lower funnel marketing. In the long run, the pie of e-commerce and even new social media platforms like Snapchat will grow bigger,” says Rajiv Dubey, head of media, Dabur India. 

Dubey, however, clarifies that this doesn’t mean that digital ad spend will shrink or ad sales of Google or Facebook will decline in India in the coming days. “The digital ad spend in India is still unsaturated and poised to grow. In the case of the CPG industry, merely 10-15 percent of the total ad spend goes to digital platforms, compared to 50 percent globally. Besides, both the companies are still among the largest ad platforms occupying nearly 80% of the digital ad budgets. Duo will continue to grow in the future as well.”

Dubey’s point of view is also reflected in the Pitch Madison Annual report 2022, which says that India’s digital ad spend crossed Rs 21,00 crore in 2021 and is expected to have a growth rate of 30% to reach a market size of Rs 27,759 crore by the end of 2022. The report also notes that advertising spends on e-commerce platforms stood at Rs 6,300 crore in 2021, and is expected to grow at a rate of 36% in 2022. The highest proportion of spends on digital media has been claimed by social media (29%, Rs 6,218 crore), closely followed by Online Video (28%, Rs 5,907 crore). While paid search accounts for 23% (Rs 5,039 crore), display banners claim 16% of the spends (Rs 3,420 crore). 

Meanwhile, digital advertising experts too have observed a change in the digital media mix of the brands. 

“Advertisers are reworking their investments with respect to the platforms and audiences they advertise on,” says Ahmed Aftab Naqvi, Global CEO & Co-founder, GOZOOP Group. 

Naqvi explains, “With multiple programmatic data management platforms having richer third party data, increased use of second and first party data, advertisers have much richer insights about the audience they want to focus on.”

Large-cap companies, like Google and Facebook, were created in a comparatively short period of time. Therefore, the risk is always related to their ability to maintain the significant growth rates they have consistently delivered, opines Sahil Shah, Managing Partner, WATConsult.  

Shah adds, “Additionally, there are strong competitors that operate in the OTT, e-commerce, gaming, and content creation industries, all of which attract significant numbers of both consumers and advertisers.” 

Kumar Awanish, Chief Growth Officer at Cheil India, echoes the sentiments. “The digital media mix is changing fast. Earlier, Google search, Facebook and other social media platforms used to get the lion’s share, this is not the case now. Most advertisers now prefer e-tailers over Google and FB as the former has consumers who are intended to buy.” 

Prashant Puri, Co-Founder & CEO, AdLift, says, “Brands are looking at spends very closely. There’s a sharp eye on customer acquisition costs due to which spends are seeing a decline. This is true not only for marketing but across all functions. I feel there’s a relook more on the branding spends than performance marketing spends.” 

Rise of e-commerce platforms 

The tech companies’ ad sales are now largely shifting towards e-commerce platforms such as Amazon and Flipkart which have quickly emerged as powerful performance advertising platforms over the past two years with an increasingly expanding user base, experts say. 

Naman Surana, National Business Director, FoxyMoron (Zoo Media), acknowledges the growth of platforms like Snap and ShareChat due to the focus on brand building, which has led to an increase in spends. "However, it would be interesting to see the transformation of these platforms with a shift in focus to the bottom of the funnel, acquisition and revenue, leading various brands to concentrate their spends on D2C," he points out. 

“The shift towards e-commerce and other interesting value-led platforms is inevitable. Marketers are aggressively investing in both content and the creators. Snap, Sharechat, and other platforms might not have a big impact on overall AdEx and thus, won't change the mix, but they are nevertheless expanding at a good rate considering that some marketers are experimenting beyond the usual platforms,” Shah explains. 

The shift started a couple of years ago. Now, the share of AdEx between the social media giants and e-commerce players has reached about 50-50. Since the ad spends usually go upward every year, the tech giants don’t feel the pinch much, says Awanish. 

Facebook has over 400 million users in India and e-commerce consumers must be 300 million users now that too with an intent to buy, says Awanish. Meanwhile, Flipkart’s ad revenues increased 50% to Rs 2,083 crore in fiscal 2022 and Amazon India generated Rs 4,170 crore from ad services in the same year.  

“With Flipkart and Amazon operating their data management programs, advertisers have a better quality audience as it involves actual shopping behaviors and transactional data and hence a shift in spends from these social media platforms,” says Naqvi. 

The Indian e-commerce industry has been witnessing an upward growth trajectory and is growing at a CAGR of nearly 20%, says a report of the Indian Brand Equity Foundation, an initiative by the Ministry of Commerce and Industry. 

Moreover, about 4,000 active e-commerce start-ups in India are also pushing the advantages of digital commerce and driving growth at a rapid speed.

 The current market scenario has affected the overall ad spending of brands to some extent and is further projected to reduce marginally in the coming year, says Mitesh Kothari, Co-founder and CCO, White Rivers Media. 

“The impact of plateaued ad revenues of tech giants can be seen especially in the ad budgets of the cryptocurrency, banking, and insurance sectors. However, we have also seen a significant surge in advertising on e-commerce which is further expected to continue in the coming years. Given that digital advertising will still continue to be essential to brands, they might internally reanalyse their strategic spending in light of the latest consumption trends across different platforms,” says Kothari.  

Digital ad spend will still grow 

Digital investments in India have been growing at some serious rate over the last many years. With such growth over a number of years and now on a serious scale, the same rate of growth might not be a reality. But that doesn't mean spending is decreasing by any means, experts point out.  

According to Shah, “The impact in India right now is coming in little pockets from some significant spending reductions by Crypto companies and startups in general as the money markets across the world have slowed pace due to signs of some form of a recession coming in. So, on a generalized basis, yes, the growth on digital would have slowed down a little, but it’s still going very strong compared to other mediums considering we had a great Diwali spend season this time around. In fact, investments in digital will always keep growing considering the world is going to be spending more time online than before.” 

Shradha Agarwal, Co-founder & CEO- Grapes agrees that the Indian market might experience certain subtle pangs of global challenges, but it is unlikely to undergo any major drawbacks.  

“The country has a wide demography and has been showing surging online behavior, which is only expected to grow exponentially with the rising GenZ and millennial consumer base along with robust plans for enhanced internet penetration in the country. Therefore, despite the multiple global challenges, the Indian digital ad sector is only expected to thrive on account of the changing consumer behavior of the demography”, says Agarwal.