Digital advertising spend in India to near $295 billion by 2021

16 October 2017 5 min. read
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Expenditure on digital advertisement in India is set to skyrocket over the next few years, at a Compounded Annual Growth Rate (CAGR) of around 31% and an expected value approaching $295 billion by 2021. The growth comes on the back of rapid expansion of the Internet consumer base in the country, and the resultant increase in data consumption.

In a new report published by KPMG India titled “The ‘Digital First’ Journey,” the Big Four consulting firm examines the rapidly expanding consumption of digital content in India, and assesses its impact on the advertising market. As per the findings, the Over The Top (OTT) video consumption in India has grown significantly within the last year itself, through mainstream channels such as Facebook, Youtube, and a growing appetite for streaming sports online. Video consumption currently accounts for 50% of data traffic and is projected to increase to 75% by 2021.

Growth of Digital advertisementsThe report attributes overall growth to a combination of factors, including: the government’s new ‘Digital India’ initiative, a spike in the usage of affordable smartphones, increased internet access in rural areas, and the overall strengthening of the digital landscape due to FinTech projects.

Video consumption has especially grown in the landscape, which has consequently increased the scope for digital advertising. According to the report, the total digital advertising spend, valued at around $77 billion (approximately 51,000 crore) in 2016, is expected to grow at a CAGR of 30.8% over the next four years, reaching a total value of $294.5 billion (Approximately 19 lakh crore) by 2021. At this value, the segment will contribute 27% of the total expenditure in the country.

Breaking this figure down, mobile advertisement spend will increase from its 2016 value of $16.9 billion (approximately Rs. 1 lakh crore) to $132.5 billion (approximately 8.6 lakh crore) by 2021. Meanwhile, the digital video advertisement spend is set to increase from $13.8 billion (approximately Rs. 89,500 crore) in 2016 to $74.4 billion (approximately Rs. 4.8 lakh crore) in 2021.

Digital Advertisement & Digital Video Advertisement

The trends in India are consistent with those around the world, with digital advertising expenditure well on its way to surpassing television advertisement spending this year, accounting for 37% of the global expenditure on advertisements. Social media, in particular, is accelerating the growth of the digital advertising segment, in India as well as across the world. Globally, social media advertising accounted for 27% of the segment, 15% of which were contributed by Facebook itself. While the exact figures for social media contribution in India were not disclosed in the report, the firm does elaborate on increasing allocations to social media within advertising budgets.

In July this year, KPMG’s Big Four rival EY released a report titled ‘Digital Inflection Point – Indian Media and Entertainment,’ which had similarly optimistic projections for the India digital advertising segment, predicting that the segment will register the fastest growth in the Media and Entertainment sector at 26% over the next four years.

Drivers of growth

A number of factors have combined to bring about the increased digitisation in the country. The Digital India initiative from the government has been effective, having laid down more than 200,000 kilometres of optical fibre as of August this year. The budget for the program has also been increased, from Rs. 6000 crore this year to Rs. 10,000 crore for next year.

Meanwhile, the introduction of Reliance Jio, a data service provider that provides 4G-speed data at very low costs, has significantly boosted data consumption in the country. The monthly average of per capita data consumption has undergone a substantial leap from 147 MB per month in March 2016 to 1 GB per month in March of this year. The report predicts that the number of wireless internet connections in India is set to reach 730 million by 2021. The figures are consistent with overall market trends in India. Earlier this year, BCG released a report predicting that India would have 850 million online users by 2025. The monumental growth will be fuelled by the expansion of the smartphone market. According to the report, the number of smartphones is expected to increase from 300 million in 2016 to 700 million by 2021, making it the primary channel for internet usage.

Mobile advertisement & Wireless data

The combination of government initiatives and increased cost-effectiveness have also significantly boosted rural penetration of internet connectivity. At a penetration rate of only 16%, rural consumption already accounts for approximately 34% of total data consumption in the country. This figure will only grow as the penetration rate increases, projected to reach 50% of the total consumption by 2020.

In urban areas, FinTech solutions have driven digitisation, with the number of users of online wallets projected to increase from 50 million to 350 million by 2022. A recent partnership between Infosys Finacle and Tonetag, aimed at providing seamless payment solutions through sound waves, hopes to reach out to 800 million consumers globally, which will further boost urban digital maturity.